FSL Trust: 2012 Was a 'Dismal' Year for Shipping

Press Release
Monday, March 25, 2013

In a letter to unit holders First Lease Ship Trust (FSL Trust) chairman Wong Meng Heng comments on the Trust's  2012 financial report: excerpts as follows:

"The industry witnessed another dismal year as weakness in freight rates and asset values persisted in 2012. This resulted in a spate of defaults, restructurings and bankruptcies as shipping companies struggled with the poor market conditions. Unfortunately, FSL Trust was not spared from the unprecedented downturn.

FSL Trust reported full year 2012 revenue of US$106.1 million, which was 4.2 per cent lower compared to the previous year. Net cash generated from operations declined by 25.4 per cent to US$47.6 million.

During the year, we conserved capital and strengthened our balance sheet, increasing our cash reserves by US$5.2 million to US$37.5 million. The majority of our vessels are leased on long-term fixed-rate bareboat charters and these continue to provide the Trust with a steady stream of cash inflow, enabling us to service our loan repayments.

Staying Nimble in Response to Challenges
When we suffered defaults by subsidiaries of Berlian Laju Tanker Tbk in February 2012, we were able to leverage on our wide network, obtain the necessary support from our partners and react swiftly to the situation. We arranged new employment for the three affected chemical tankers in the ‘Nordic Tankers 19,000 Stainless Steel Pool’ which ensured that our vessels would continue to generate revenue for the Trust, albeit at lower rates.

We believe that the chemical tanker sector is poised for a recovery as it has promising supply-and-demand fundamentals, and deploying our vessels in this pool will allow us to benefit from potential increases in freight rates.

Another lessee, TORM A/S (“TORM”), succumbed to the prolonged weakness in the shipping market and ran into financial difficulties. To help facilitate TORM’s restructuring, we agreed to reduce our bareboat charter rates to variable rates that TORM achieves in the market. In return, all early buyout, purchase and lease extension options in TORM’s favour were cancelled and FSL Trust received a 2.5 per cent equity stake in the restructured TORM.

Trying to achieve revenue stability amid this volatile freight rate environment was challenging. We managed to secure two three-year time charters with Petròleo Brasileiro S.A., one of the world’s largest energy companies, for our two product tankers, FSL Hamburg and FSL Singapore. This move gives us better cash flow visibility for the two vessels, which had previously traded in the spot market since 2010.

Apart from maintaining our base portfolio of long-term bareboat charters and fixed-rate time charters for stability, we decided to keep a small portfolio of vessels, specifically the three chemical tankers, employed at market rates with the flexibility to fix more lucrative charters when market conditions improve. The variable nature of the renegotiated rates of the two product tankers leased to TORM also allows FSL Trust to benefit from a market recovery.

The Trust continues to face risks of defaults and we remain cautious about the outlook for the Trust. We have completed our restructuring with OMNI Ships Pte. Ltd., the lessee of our two dry bulk carriers and are still engaged in another restructuring discussion with one other lessee. On a combined basis, we expect both of these restructurings to have a material impact on revenues for the current financial year."

 

Maritime Reporter June 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

US Refiners' Group Wants Wide Debate on Oil Exports

The U.S. oil refining industry's association is not opposed to lifting the country's 40-year-old ban on crude exports as long as the move is part of a bigger effort to lower barriers to trade,

‘Old Salt’ Designation Passed to Vice Adm. Tidd

The “Old Salt” designation, honoring the Surface Warfare Officer (SWO) serving on active duty with the earliest Surface Warfare Qualification, passed from Adm. Sam Locklear to Vice Adm.

Voith Turbo Names Calhoun VP of O&G Sales

Shawn Calhoun has joined Voith Turbo’s Power, Oil & Gas Division as Vice President of Sales – Oil and Gas, to be based at the company’s new Houston, Texas office

Finance

S. African Competition Watchdog Fines Japanese Shipping Firm

South Africa's competition watchdog has recommended Japanese shipping firm Nippon Yusen Kabushiki Kaisha Ltd (NYK) pay a 104 million rand ($8.5 million) penalty

Activists Planning Protest Against Shell's Arctic Business

U.S. environmental activists said they planned to protest on Tuesday against the launch of the second of two oil rigs central to Shell's plans to drill for oil in the Arctic.

Protests Shut Channel Tunnel Again

The Channel Tunnel closed again on Tuesday due to protesting MyFerryLink workers, its operator Eurotunnel and French traffic supervision body Bison Fute said. The

 
 
Maritime Standards Naval Architecture Offshore Oil Pipelines Port Authority Salvage Ship Electronics Ship Repair Ship Simulators Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1769 sec (6 req/sec)