Borealis taps into boxship optimism

Borealis Maritime is entering the debt market at the right time from a container point of view, believes chief executive Christoph Toepfer.

His comments come after the London-based shipowner raised $150m in bonds last week secured on a fleet of 17 feeder boxships and four medium-size bulkers.

The issue was oversubscribed by $260m, but Toepfer says there are no plans to enlarge the offering ahead of the bond being listed in Oslo.

Borealis primed for $150m in new bonds

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This is despite the appetite of investors that appear sold on the picture of container and bulker shipping markets in a phase of recovery.

In documents presented to investors, Borealis says shipping markets are showing strong market fundamentals, limited supply growth and stable growing demand.

A key feature of the recovery is attributed to the structure of the container feeder orderbook.

Borealis notes that asset values for 10-year-old vessels of 2,600 to 2,900 teu are close to their all-time lows. The company argues that the downside risk on asset values and charter rates is limited.

Borealis deems it uneconomical for owners to order more feeder containerships.

It estimates that secondhand vessels need to appreciate by about 90% before it makes economic sense to order a newbuilding.

Charter rates need to increase from $9,350 per day to $14,400 per day to justify ordering a newbuilding, the shipowner says.

Toepfer says the focus of the company is upon acquisition in the secondhand feeder boxships market.

“The values have recovered well on the container side. And overall the outlook for the market is positive,” he said.

The move by Borealis follows bond issues by container companies including MPC Container Ships and Global Ship Lease. For Borealis, it is a first move into the bond market.

“We want to diversify our capital resources,” Toepfer said.

“We have always relied on bank debt and want to spread our overall capital resources and get a wider investor network.”

“For a long-term strategy, this is also quite attractive.”

He concedes that it is an opportunistic move at a time when capital markets are open and before any global events which might lead to them closing again. Some estimates suggest that the Oslo bond market has raised NOK 45bn ($5.63bn) so far this year, more than twice the level seen in 2016.

The developments come as Frederik Rye-Florentz, who helped found Borealis in January 2010, left his position as investment director with the company. Elias Sakellis, a former partner in Pillarstone and Quantum Pacific, has been appointed its new chief investment officer.