Narrative
Full Description
Project narrative
On May 28, 2019, Bank of Communications Financial Leasing Co., Ltd. (BoCom Leasing) entered into a $66.4 million USD financial sale and lease-back agreement with TORM A/S for four vessels built in 2011. The agreement carried a maturity of 6 years with final maturity on August 31, 2026. and an interest rate of LIBOR plus a margin of 3.30% and a bareboat charter hire payable in monthly installments. On August 6, 2020, the agreement was amended to include scrubber financing for $10.8 million, increasing its face value to $77.22 million USD, albeit with that financing carrying a maturity period of three years and a final maturity on February 5, 2025 and an interest rate of LIBOR plus a margin of 2.40% and a bareboat charter. There were no financial covenants in this agreement. TORM A/S is the bareboat charter and BoComm is the owner of vessels. TORM A/S has a purchase obligation on the vessels.
Staff comments
1. Torm A/S is based in Copenhagen, Denmark. It is a shipping company that owns and operates product tankers. The company's product tankers carry refined oil products such as gasoline, jet fuel, naphtha and diesel oil. 2. A lease is a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. The lessor is the legal owner of the asset, while the lessee obtains the right to use the asset in return for regular rental payments. Under a capital lease (a financial arrangement where the lessee/borrower uses an asset and pays regular installments plus interest to the lender/lessor), rental payments are usually classified as interest and obligation payments, similarly to a mortgage (with the interest calculated each rental period on the outstanding obligation balance). AidData codes capital leases as loans. 3. Sale and leaseback (or sale-leaseback) agreements are generally considered to be off-balance-sheet hybrid debt products.