UK containership owner Global Ship Lease (GSL) has been tipped to pursue an early bond refinancing next year to lower costs.
Clarksons Platou Securities, the investment banking arm of broker Clarksons, said the company faces total bullet payments amounting to $342m in 2022.
Analysts Hans Lund and Henriette Vevstad said the company will be busy refinancing debt in 2021.
Boxship owners, such as MPC Container Ships, Songa Container and Borealis Finance, have been seeking new financing deals to weather the coronavirus-related downturn.
But New York-listed GSL had already raised significant amounts of new liquidity before the worst happened, selling $51m of new shares and $100m of notes towards the end of last year.
Sisterships to be scrapped
The Ian Webber-led owner followed this up with a refinancing of loan maturities in February with new facilities of $38m and $9m.
The company has also agreed to scrap its two oldest ships, the 2,262-teu GSL Matisse and Utrillo (both built 1999).
Clarksons Platou believes $8m from these disposals will go towards bond redemption.
There should be $205m outstanding on the 2022 bonds at maturity, the analysts said.
"Adjusting for the call price of 102.469% we arrive at a refinancing need of $238m," they added.
Also in 2022, GSL has a senior loan of $102m maturing and a junior loan of $28m.
The facilities are cross-collateralised by three vessels with a charter-adjusted value of $248m.
We expect management to wait until after November 2020 when the call price of the bond steps down to 102.469% from today’s price of 104.938%
Clarksons Platou Securities analysts
"We expect management to wait until after November 2020 when the call price of the bond steps down to 102.469% from today’s price of 104.938%," the analysts said.
"In the attempt of raising new capital, GSL has 21 vessels which could serve as security. That includes the 16 remaining vessels in the bond collateral package and five vessels which are currently unpledged."
The ships have an average age of 17 years and carry a value of $355m, the analysts estimated.
Asset values declined in the sector by about 20% in April as a result of the pandemic, Clarksons Platou said.
Small financing gap
This leaves GSL with loan capacity of $200m at current values, implying a small refinancing gap of $38m.
The company has $807m in secured debt and $59m in unsecured debt.
Of its fleet of 45 ships, 40 serve as collateral under various credit facilities.
The analysts view its cash position as strong, with $92m on hand at the end of the first quarter.
This equates to $72m in free liquidity when adjusting for the cash covenant of $20m.
There is also a "solid" revenue backlog of $700m, with an average term of 2.3 years ensuring long-term cash flow visibility and stability, the analysts added.
The "solid cash position, additional sources of liquidity and five unencumbered ships support an early redemption of the 2022 notes", they said.
"No material debt maturities until 2022 ease [the] refinancing risk ahead of 2022 bonds."
Charter eggs in too few baskets?
However, Clarksons Platou sees the company as facing "a concentration risk" in its charters, with 36% of the backlog deriving from French giant CMA CGM.
The downward pressure on rates and asset values weakens the company’s earnings outlook and asset backing, the firm said.
The analysts also envisage deteriorating competitiveness, with 27 of GSL's ships aged over 15 years.
GSL has invested $100m on seven secondhand vessels over the past year, the latest being two 2004-built, 6,080-teu post-panamax boxships acquired from Black Pearl Containers for $24.5m.
It posted net profit of $621,000 for the first quarter of this year, which is a 94% reduction on the $9.6m profit it made during the same period last year.
"Our extensive contract cover and high-quality fleet have largely insulated us from the coronavirus-related disruptions that have expanded to affect the global economy," executive chairman George Youroukos said in May.
