Narrative
Full Description
Project narrative
On July 6, 2018, China Merchants Bank Financial Leasing (CMBL) entered into a sale and lease back agreement worth $180 million USD with Star Bulk Carriers (Star Bulk) for the acquisition of 15 shipping vessels. The lease period is 5 years with an interest rate of 2.8% (280 basis points), with all 15 ships to be leased back to Star Bulk as bareboat charters, with the leasing cost to be paid quarterly upon delivery of the vessels. Upon the second anniversary of each vessel's delivery, Star Bulk has the option to purchase each vessel at a pre-determined, amortizing purchase price. Per the terms of the agreement, Star Bulk is obligated to purchase each vessel at the end of the lease period at a purchase price of between $2.2 million USD and $8.4 million USD. The 15 vessels being sold to CMBL are being acquired from Songa, a Norwegian shipowner, by Star Bulk, which is paying for the vessels with 13.725 million shares of the company's stock and $145 million USD in cash, which is being funded by the sale and leaseback agreement. The agreement provides Star Bulk with an additional $35 million USD in liquidity, of which $19.6 million USD has been designated for the acquisition and installation of exhaust gas cleaning systems (‘scrubbers’) for the 15 vessels. As of November 2019, $12,165,000 USD had been drawn down of the available $19.6 million USD for the purchase of the scrubbers.
Staff comments
1. Sale and leaseback (or sale-leaseback) agreements are generally considered to be off-balance-sheet hybrid debt products. 2. A "bareboat charter" is a charter in which the owner of the boat (in this case, CMBL) leases only the vessel (with no crew) to the charterer or lessee (in this case, Star Bulk). 3. Star Bulk Carriers was incorporated in 2006 and is based in Marousi, Greece.