Seaspan Corporation has signed a contract to
build four 2500 TEU vessels from Jiangsu Yangzijiang Shipbuilding in China. These new orders are incremental to Seaspan's original contracted fleet and will increase the company's total fleet to 29 vessels. The four newbuilding vessels will be delivered between September 2008 and March 2009. The total delivered cost is expected to be approximately $44.5 million per vessel, subject to certain pre-delivery expenses remaining at budgeted levels.
Seaspan also announced that it has arranged simultaneous twelve-year charter agreements for these four vessels with China Shipping Container Lines (Asia) Co. Ltd. ("CSCL Asia") at an initial rate of $16,750 per day, increasing to $16,900 per day after six years. CSCL Asia is a subsidiary of China Shipping Container Lines Co. Ltd. ("CSCL"), the world's sixth largest liner company. CSCL will guarantee CSCL Asia's performance under the charter parties.
Each new vessel is expected to contribute between $4.4 million and $4.8 million in incremental EBITDA per annum upon delivery. For this purpose, EBITDA shall mean net earnings before interest, undrawn credit facility fees, taxes, depreciation and amortization of deferred financing fees. This will result in an increase in distributable cash when the vessels are delivered and operating. The 2500 TEU vessel size will complement Seaspan's existing fleet consisting of 9600 TEU, 8500 TEU, 4250 TEU, and 3500 TEU vessels.
Seaspan also announced that, in addition to the firm order for the initial four 2500 TEU vessels, the company has the option to order an additional eight 2500 TEU vessels, in two tranches of four vessels each, for the same price as the initial four. Seaspan has made no commitment, financial or otherwise, to build any of the option vessels. If the additional vessels are built, CSCL Asia would have the option to charter the second group of four vessels under the same terms as the first four. The last group of four vessels would only be built if acceptable long-term charters were arranged. Seaspan would have until June 30, 2006 to exercise these options.
Seaspan Management Services Limited ("SMSL") will supervise the construction of the new vessels and operate the ships for Seaspan at a fixed rate of $4,000 per day through 2011. Jiangsu Yangzijiang Shipbuilding, which is building the vessels, is located on the Yangtze River in the Jiangsu Province of China. The yard has been in business for over 30 years and is one of the largest private shipyards in China. Predecessor companies of SMSL successfully built barges and tug hulls at the yard in the 1990s. The SMSL technical team will, as with other newbuilding orders, drive the ship design and oversee the construction, to ensure uniformity with the existing fleet.
The company is in the process of arranging long-term debt financing for the firm order, which is expected to be in place within 6 weeks.