MPC Container Ships (MPCC) has placed a $144.4m order for two wide-beam 5,500-teu container ships to be built in South Korea.
The Oslo-listed company’s first newbuilding order was signed today on the back of long-term charters to Israeli liner operator Zim.
Zim yesterday confirmed it has agreed seven-year charters for six 5,500-teu vessels with investors initiated by Germany’s MPC Capital.
Sources told TradeWinds that four of the vessels were ordered by MPC Capital, the founding shareholder and key sponsor of MPCC.
Two of the vessels are newbuildings ordered by MPCC as part of a separate deal with the shipyard.
The contracts are with South Korea’s HJ Shipbuilding & Construction (HJSC), formerly known as Hanjin Heavy Industries & Construction.
The move marks a new avenue for MPCC, which has focused on secondhand tonnage since commencing operations in April 2017.
The company will pay $72.2m for each vessel, with delivery expected in early 2024.
Time charter rates for the eco-designs average out at $39,000 per day, adding $178m to charter revenues.
That comes on top of five charters that MPCC has concluded “at very favourable rates” through to 2027, the company said.
Those fixtures, including four multi-year charters, would add $220m to contracted charter revenues.
MPCC chief executive Constantin Baack called it an “extraordinary newbuilding opportunity”.
“The vessels will be fully de-risked over the initial charter, which is extraordinary for a newbuilding project,” he told TradeWinds.
“Front-loaded charter is also a special feature, paying back most of the investment over the initial two to three years.”
Strong earnings potential
Fearnley Securities said the ships should generate Ebitda of about $70m each over the contract duration, recouping virtually the full cost of the newbuildings.
“While this to some extent sets MPCC on a new course, the on-paper risk-free nature of the deal makes this an understandable and sensible deal for MPCC,” the investment bank added.
“It is crucial to highlight that MPCC has ordered these vessels directly from the yard and there is no third-party involvement here. We also find the price to be slightly below current quotes.”
Under the front-loaded structure, MPCC will recoup 70% of its investment in the first three years, Fearnleys calculates.
It believes counterparty risk is low, with Zim having a strong balance sheet.
On the basis of the contract structure and low loan to value at MPCC, Fearnleys argues that the owner could get close to 100% funding on the vessels.
But it expects financing to cover 60% or 70% of the contract price.
Options remain
The move into newbuilding will also enable MPCC to upgrade its environmental footprint in line with upcoming decarbonisation regulations.
MPC Capital ordered four 5,500-teu newbuildings in October 2021 for a reported cost of $260m in HJSC’s first order since 2014.
The deal included two options that MPC Capital still retains, according to the Hamburg company’s managing director of shipping, Christian Rychly.
The total cost of charters for the sextet to Zim is around $600m.
Zim chief executive Eli Glickman yesterday described the six-vessel deal as “another attractive chartering transaction for newbuild vessels”.
The deal secured “modern and efficient tonnage vessels which are ideally suited to serve on our expanded network of expedited services, as well as other regional services”, he said.
Zim is one of the more aggressive players in the charter market, with a penchant for mid-sized wide-beam container ships.
In February, it committed to taking eight 5,300-teu container ships on long-term charter from Greece’s Navios Maritime Partners.
The wide-beams are scheduled for delivery from China’s Zhoushan Changhong International Shipyard between the third quarter of 2023 and the final quarter of 2024.
