Narrative
Full Description
Project narrative
On May 17, 2013, Irises Shipping Ltd. and Nereus Navigation Ltd. — two special purpose vehicles that are legally incorporated in the Marshall Islands and wholly owned subsidiaries of Paragon Shipping Inc. — signed a $69,000,000 loan agreement (contract ID#6410201301100000164 for Irises Shipping Ltd. and contract ID#6410201201100000165 for Nereus Navigation Ltd.) with the Ningxia Branch of China Development Bank (CDB) for the construction and acquisition of two vessels (a 4,800 TEU container ship with Hull Number H656 and a 4,800 TEU container ship with Hull Number H657). The loan carries the following borrowing terms: a 120-month (12-year) maturity and an interest rate of LIBOR plus 4% margin. As sources of collateral, Nereus Navigation Ltd. and Irises Shipping Ltd. were both required to maintain minimum cash balances of $2,300,000 in lender-controlled debt service accounts. Additional sources of collateral are identified in the ‘Security Documents’, which are cross-referenced in the May 17, 2013 CDB loan agreement. The loan was supported by repayment guarantees from Paragon Shipping Inc. and Box Ships Inc. The borrower was expected to use the loan proceeds to partially finance two shipbuilding contracts between Zhejiang Ouhua Shipbuilding Co., Ltd, Irises Shipping Ltd. and Nereus Navigation Ltd.: a $56,703,619.44 contract dated 22 April 2010 [with addendum no. 1 dated 22 April 2010, addendum no. 2 dated 17 March 2011, addendum no. 3 dated 4 August 2011, addendum no 4 dated 4 May 2012 and addendum no 5 dated 24 September 2012] and a $57,500,500 contract dated 8 May 2010 with addendum no. 1 dated 18 May 2010, addendum no. 2 dated 17 March 2011 and addendum no 3 dated 24 September 2012]. The borrower was expected to use the loan proceeds to finance the lower of 60% of the construction cost of the vessels, or 80% of the vessels' market value at delivery. Paragon Shipping Inc. also granted to Box Ships Inc. an option to acquire the two 4,800 TEU containerships. The CDB facility could be freely transferred to Box Ships Inc in the event that the option was exercised. The originally expected delivery date for the 4,800 TEU container ship with Hull Number H656 was April 30, 2014. The originally expected delivery date for the 4,800 TEU container ship with Hull Number H657 was May 30, 2014. In December 2013, Paragon Shipping Inc. entered into an agreement with Zhejiang Ouhua Shipbuilding Co., Ltd to cancel one of its two 4,800 TEU container ship new building contracts. Following the cancellation, the CDB loan (credit facility) was cancelled.
Staff comments
1. AidData has estimated the all-in interest rate by adding 4% to average 6-month LIBOR in May 2013 (0.421%), or 4.421%. 2. The loan agreement can be accessed in its entirety via https://www.dropbox.com/s/yq8vzfm5cwshftc/CDB%20loan%20contract%20with%20Nereus%20Navigation%20Ltd.%20and%20Irises%20Shipping%20Ltd..pdf?dl=0. 3. Paragon Shipping Inc. is a corporation incorporated in the Republic of the Marshall Islands with registration number 18649, with its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 and which is listed on the NASDAQ Stock Exchange under the symbol PRGN. 4. Box Ships Inc. is a corporation incorporated in the Republic of the Marshall Islands with registration number 41281 with its registered address at Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960 and which is listed on the New York Stock Exchange under the symbol TEU.