FSL Trust Management Pte. Ltd. (FSLTM), as trustee-manager of First Ship Lease Trust wishes to announce that it has secured a temporary relaxation of two of its loan covenants from its lenders. The relaxation of covenants would be in effect for 12 months until end-June 2013.
In view of the economic weakness in Europe and further deterioration in the shipping market, FSLTM requested for and was granted a temporary relaxation of two loan covenants from its lenders to address potential breaches over the next 12 months. The two covenants that the lenders have agreed to relax are the security value-to-loan (VTL) ratio and the debt service coverage (DSC) ratio.
During the relaxation period, the minimum VTL ratio, which is the minimum charter-free fair market value of FSL Trust’s vessel portfolio over the outstanding loan balance, will be reduced from 125% to 100% while the DSC ratio will be relaxed from at least 1.1:1 to at least 1:1.
During the relaxation period, FSL Trust is restricted from paying any distributions to unitholders. The Trust will also incur an additional margin of 2% per annum on the shortfall amount, which is the difference between the outstanding loan balance and the theoretical loan balance assuming VTL ratio is 125%.
Mr. Cheong Chee Tham, Senior Vice President and Chief Financial Officer of FSLTM said, “Our lenders’ continued support during these challenging times affirms their confidence in FSL Trust and reflects the strong relationship we have with our lenders. The relaxation of the covenants cushions the trust from the economic uncertainties and depressed vessel valuations expected over the next 12 months.”