5 July 2016

Borrower Briefing Cost of shipping debt only going to keep rising – even for the strongest credits With Kexim and Korea Development Bank’s capital ratios – which have taken vast hits from ship lending – about to be topped up by the state, and many EU banks having to restructure portfolios of non-performing shipping loans, the depth of the lending market for shipping borrowers is at its shallowest for years. And it may become shallower yet. The European Central Bank, having already combed through ship financiers' books during its 2014 Asset Quality Review, is doing another review of shipping loans. Tighter supervisory conditions may follow, dependent on the findings. But despite the lack of funding choice, shipowners are still finding takers for newbuild debt financings – albeit loan pricing is on the increase even for strong credits. Last month Royal Caribbean Cruises signed a $1.453 billion Coface-guaranteed facility to fund construction of two edge-class 117,900 GRT passenger cruise vessels for its subsidiary Celebrity Cruises. The debt is priced at a fixed rate of 322.5bp inclusive of margin – around 70bp higher than the borrower’s €892 million Coface-backed deal in 2013, and the subsequent Coface-backed dollar tranche for the same newbuild in 2015, which priced at a fixed rate of 260bp including margin. Last month Gener8 Maritime also amended and upped a $259.6 million Sinosure-covered 15-year senior secured loan (raised last November) to $385.2 million to complete the financing of six VLCC newbuilds from Shanghai Waigaoqiao Shipbuilding. Citibank, Chexim and Bank of China lead arranged the Gener8 deal which comes with a margin of 200bp over Libor. More surprisingly, Navig8 Chemical Tankers managed to fund a new tanker order in a deal sole lead arranged by ING Bank and with no ECA

support. The deal is rumoured to have priced at 300bp-plus all-in. Although all three deals have little in common in terms of credit strength, they do illustrate the shape of shipping lending and pricing for the coming year at least. All are either ECA-backed or from some of the few commercial bank markets that still have appetite, albeit with caveats, for shipping debt – notably France, China and the Netherlands. And all are priced around or above 300bp all-in. In short, as the lending market gets smaller, the cost of newbuild shipping debt looks set to continue to rise unless more ECA – notably German, Korean and to a lesser extent Japanese - debt returns to the market.

Talking shop – borrower comment Borrower: PhosAgro Sector: Fertilizer production Deal: $250 million pre-export financing Tenor: 4 years Lenders: Societe Generale, Rosbank and UniCredit Financial close: 28 June 2016 Andrey Guryev, CEO, PhosAgro: “The deal priced well and I am pleased that the cost of foreign-currency financing for us has returned to an attractive level. This new PXF will be used for refinancing of existing short-term debt and refinancing of more expensive debt. “It also serves as a benchmark for appetite for PhosAgro and ensures we have a full range of financing options available, in anticipation of our $500 million Eurobond refinancing in 2018.”

Borrower: Sucden Sector: Comodities/Sugar Deal: $400 million revolving credit Tenor: One year plus two one-year extension options Lenders: Rabobank, ING, and Societe Generale Financial close: 21 June 2016

Thierry Bourvis, CFO, Sucres et Denrées (Sucden): “Sugar pricing has increased by roughly 40% since start of 2016. That, coupled with the expansion of the group into cocoa and coffee trading, led us to increase the facility – the RCF was initially launched at $225 million but was so well received by banks it closed substantially oversubscribed. “The strong bank appetite reflected the risk quality (strong balance sheet and results, limited leverage) of Sucden. We are also a growing business with opportunities for bilateral financing above and beyond the revolver, and there is a lot bank liquidity for bilateral short term loans.”