Narrative
Full Description
Project narrative
On September 27, 2018, China Merchants Bank Financial Leasing (CMBL) entered into a sale and leaseback agreement worth USD 57.3 million with Star Bulk Carriers (Star Bulk) for the acquisition of the Star Eleni and Star Leo, both shipping vessels. The funds from the agreement were used to exercise purchase agreements on the two vessels from Star Bulk's previous sale and leaseback agreements with China State Shipbuilding Company (CSSC). The new agreement with CMBL paid the outstanding amount of USD 28.7 million and 29.4 million on the Star Eleni and Star Leo, respectively (captured in projects #92118 and #92119). Following the sale of the two boats to CMBL, the two vessels were immediately leased back to Star Bulk through two, identical 5 year bareboat charters. The leaseback agreement contains an unknown, variable interest rate. Upon the second anniversary of delivery of the vessels, Star Bulk has the right to purchase the two ships. At the end of the 5 year bareboat charter, Star Bulk is obligated to purchase the Star Eleni for USD 18.2 million and the Star Leo for USD 20 million. Star Bulk will ultimately own the boats, either upon exercise of the company's purchase options or expiration of their charters. Therefore, the ships are recognized by Star Bulk as fixed assets.
Staff comments
1. As this is refinancing a previous commitment, AidData has not recorded a transaction amount to avoid double-counting financial commitments. 2. Sale and leaseback (or sale-leaseback) agreements are generally considered to be off-balance-sheet hybrid debt products. 3. 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).