Global Ship Lease agrees revised terms on $800m facility
Global Ship Lease has finally stitched together a deal with lenders of its $800m credit facility, which has done away with the loan-to-value covenant of which GSL was in breach until the end of November this year.
Among the concessions made, GSL has suspended dividends and agreed to the cancellation of $200m from the undrawn amount. The company has also issued a transparent hint that it does not expect containership asset values to improve for at least another year-and-a-half. The next loan-to-value “test” has been set for April 30, 2011.
GSL will be able to withdraw money under the facility in the meantime to bankroll its pledged purchase of the 2001-built, 6,627 teu containership CMA CGM Berlioz, which is scheduled to be delivered to GSL next month.
GSL was in discussions with lenders on the covenant breach for several months, but the company had obtained standstill agreements while talks progressed.
While expressing confidence that GSL’s deal would be done, chief executive Ian Webber complained at its quarterly results presentation last week that bankers were getting “tougher” with the shipping industry.
In the amendment agreed, GSL is to pay an amended interest rate of 3.5% over the London interbank offered rate through to November 30, with the margin thereafter fluctuating between 2.5% and 3.5% depending on the prevailing loan-to-value ratio.
GSL has committed to suspending its dividend, since cash flow has been pledged to repay the loan. GSL has also deferred redemption of $48m in preferred shares until the final maturity of the credit facility in 2016.
Dividends may be resumed once GSL’s loan-to-value ratio drops below 75%. From that point, repayment would be fixed at $10m per quarter.
Mr Webber said: “The container shipping industry is facing significant challenges and containership values have experienced substantial declines.
“With this agreement, we have accomplished two important strategic objectives. First, by aggressively paying down debt, we have enhanced our position to emerge from this unprecedented market downturn as a stronger company.
“Second, by waiving the loan-to-value covenant, we have insulated the company through April 2011 against what is likely to be a continuing period of depressed asset prices.”
Among the concessions made, GSL has suspended dividends and agreed to the cancellation of $200m from the undrawn amount. The company has also issued a transparent hint that it does not expect containership asset values to improve for at least another year-and-a-half. The next loan-to-value “test” has been set for April 30, 2011.
GSL will be able to withdraw money under the facility in the meantime to bankroll its pledged purchase of the 2001-built, 6,627 teu containership CMA CGM Berlioz, which is scheduled to be delivered to GSL next month.
GSL was in discussions with lenders on the covenant breach for several months, but the company had obtained standstill agreements while talks progressed.
While expressing confidence that GSL’s deal would be done, chief executive Ian Webber complained at its quarterly results presentation last week that bankers were getting “tougher” with the shipping industry.
In the amendment agreed, GSL is to pay an amended interest rate of 3.5% over the London interbank offered rate through to November 30, with the margin thereafter fluctuating between 2.5% and 3.5% depending on the prevailing loan-to-value ratio.
GSL has committed to suspending its dividend, since cash flow has been pledged to repay the loan. GSL has also deferred redemption of $48m in preferred shares until the final maturity of the credit facility in 2016.
Dividends may be resumed once GSL’s loan-to-value ratio drops below 75%. From that point, repayment would be fixed at $10m per quarter.
Mr Webber said: “The container shipping industry is facing significant challenges and containership values have experienced substantial declines.
“With this agreement, we have accomplished two important strategic objectives. First, by aggressively paying down debt, we have enhanced our position to emerge from this unprecedented market downturn as a stronger company.
“Second, by waiving the loan-to-value covenant, we have insulated the company through April 2011 against what is likely to be a continuing period of depressed asset prices.”
