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Finnvera reportedly said “no” to guarantees for STX Finland’s TUI orders

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Written by Kari Reinikainen Kari Reinikainen

Category: Top Headlines Top Headlines

Published: 12 January 2013 12 January 2013

Finnvera, the Finnish government’s export credit agency, has reportedly refused to issue guarantees for loans of STX Finland, the troubled Finnish shipbuilder owned by South Korea’s STX Business Group, due to the Finnish company’s poor financial state, the Helsingin Sanomat daily reports on its website.

“The company has been declared a company in crisis, to which it is not possible to grant funding under the terms of EU’s state aid guidelines, according to the ministry of labour and economic affairs and the government’s specialist financing organization Finnvera, the paper said.

Helsingin Sanomat cited an unnamed person close to the situation, who said that STX Finland has seen “a dramatic weakening in liquidity in the course of last autumn.” The situation means that STX Finland is on the brink of bankruptcy and the two orders from TUI Cruises could be lost, the paper stated.

Finnvera has not commented on the matter on its website and Cruise Business Online has been unable to obtain a comment from the company as the news broke on Saturday morning. However, Finnvera does say on its website that it granted a 12 year loan of €180 million to Viking Line after the company took delivery of the 58,000 gross on cruise ferry Viking Grace from STX Finland earlier this week. The amount equals to about 70% of the value of the contract. Finnvera continued by saying that it also issued guarantees for STX Finland so that the shipbuilder could raise loans to cover financing needs during the construction of the vessel on the commercial market.

Meanwhile, work has started in Turku on the first of the two ships TUI Cruises has on order, the 97,000 gross ton Mein Schiff 3 is due for delivery next year, while the second vessel that has been quoted at 99,300 gross ton, should be delivered in 2015.

The Finnish shipbuilding industry has faced a major collapse once before in the last quarter of a century. In 1989, Wartsila Marine Industries that had been formed two years earlier by merging the shipbuilding units of Wartsila and Valmet, two Finnish engineering groups, collapsed due to a large orderbook that had been under-priced, which led to a serious liquidity crisis at the builder.

The situation was overcome by a debt-to-equity conversion, whereby the companies that had vessels on order at the yard converted their claims for shares in a new shipbuilder, called Masa-Yards, and agreed a higher price for their ships to keep the builder afloat. The arrangement was worked out by Martin Saarikangas, who became CEO of the new company and Ted Arison, then head of the Carnival group. In 1991, the Norwegian Kvaerner group acquired the company that became known as Kvaerner Masa-Yards.

Finnish government turns cold towards cruise industry

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Written by Kari Reinikainen Kari Reinikainen

Category: Top Headlines Top Headlines

Published: 11 January 2013 11 January 2013

A decision by the Finnish government not to grant STX Finland a subordinated loan of €50 million but a smaller innovation grant instead that was not enough to secure an order for a third Oasis class cruise liner for the Finnish builder, has raised controversy in the country.

Martin Saarikangas, a former conservative MP and formerly head of Kvaerner Masa-Yards, a predecessor company of STX Finland, has led criticism and stated that the decision puts between 10,000 and 20,000 jobs at risk and cold lead to the wipe out of the Finnish maritime technology cluster in almost its entirety.

 Meanwhile, Erkki Tuomioja, social democrat foreign minister in conservative prime minister Jyrki Katainen’s wide coalition, has defended the government’s decision. He said in his blog after the New Year that one should ask at what level of cost and for the benefit of whom jobs could be retained by subsidizing shipbuilding. He also asks how many jobs could have been created by funding growth sectors that have received no backing from the state.

“Another important question is how sustainable and sensible is it that the beneficiaries of these grants have been American shipping companies that operate cruise ships in the Caribbean and Asian companies that own European shipyards,” he asked in his blog, referring to STX Finland that is part of the Seoul based STX Business Group through its fully owned subsidiary STX Europe, which also owns 64% of the shares in STX France that won the Oasis order.

Tuomioja also said that it would not have been certain that Royal Carbbean Cruises Ltd (RCCL) would have awarded the order to STX Finland even if a €50 million loan had been awarded to the yard. “In the worst case, it would only have been extraordinary aid to the owner of the yard to cover the costs of running the yard down,” Tuomioja said.

After Christmas, STX Finland said it would commence talks with representatives of its staff to seek a 30% cut in fixed costs. A shop steward at its Rauma yard said in the Finnish media this would mean hundreds of job cuts in the currently 2,200 strong workforce of STX Finland.

This week, economic affairs minister Jan Vapaavuori, a key person behind the government’s decision in the aid package negotiations, was cited by the Finnish media to say that this did not result from the government’s decision regarding the Oasis class ship order.

STX Finland has two 97,000 gross ton cruise liners on order from TUI Cruises, a German company in which RCCL has 50% of the shares. However, construction time financing of the two was linked to the assumption that STX Finland will also win the Oasis order. As this did not happen, the financing of the two ships is not in place. Should talks to arrange that fail, STX Finland’s Turku yard is likely to face closure, it has been reported, already in March according to some observers.

The Green Party, which is also a member of the current government coalition, has a history of strong backing to new emission control rules that will take effect in a region that covers the English Channel, the North Sea and the Baltic from 2015. The shipping industry has warned that this will lead to significant increases in operating costs as fuel with lower sulphur content will have to be used, which is more expensive than the fuel currently in use, or scrubbers have to be fitted in exhausts of vessels, which is a capital expenditure item.

Project Orient seeks an investor for classic liner service

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Written by Teijo Niemelä Teijo Niemelä

Category: Top Headlines Top Headlines

Published: 10 January 2013 10 January 2013

Project Orient Ltd (POL) has been set up with a view to restarting a liner service between Southampton and Sydney. The 25-night voyage to Sydney will have a lead-in one-way fare of about £3,000 (E3,683) per passenger.

Discussions have already been held with European shipyards re the vessels in question. "To make the service viable we would need two ships, ideally [each] of 100,000gt for 2,200 passengers. In other words a four-star-plus ship," explains Nigel Lingard, non executive director of POL which is headed up by Asif Masshadi (once an executive on the Innovations catalogue).

The aim is to offer a monthly service in either direction. "To get market credibility you need to have pretty much a scheduled liner service," Lingard says. The classic route is via Cape Town, Fremantle and Perth to Sydney but variations are under consideration, including sailing via the Suez Canal and Singapore and also via the Panama Canal.

The key next step is to find an investor, such as a Sovereign Wealth Fund, which may well have an interest in where the ships are built, what route they sail and their design, for example vis a vis propulsion. Lingard says: "This might be a project that lends itself to LNG. Wartsila says it is perfectly feasible as the vessels will only call at major ports along the way."

Stephen Payne, naval architect on Cunard Line’s Queen Mary 2, Deltamarin and STX have all been involved in the early stages of the ship design.

Recreating the heritage of the golden age of travel is how Masshadi describes the Project with a catchphrase being an "old dream becomes a new reality".

By Susan Parker

Norwegian Cruise Line announces launch of IPO

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Written by Teijo Niemelä Teijo Niemelä

Category: Top Headlines Top Headlines

Published: 08 January 2013 08 January 2013

Norwegian Cruise Line Holdings Ltd. ("Norwegian") and NCL Corporation Ltd. announced today the launch of Norwegian's initial public offering of 23,529,412 ordinary shares pursuant to a registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission (the "SEC"). Norwegian will grant the underwriters a 30-day option to purchase an aggregate of up to 3,529,412 additional ordinary shares. Norwegian intends to list the ordinary shares on the NASDAQ Global Select Market and, subject to official notice of issuance, the ordinary shares will trade under the symbol "NCLH."

UBS Investment Bank and Barclays are acting as bookrunners and the representatives of the underwriters for the offering. Citigroup, Deutsche Bank Securities, Goldman, Sachs & Co. and J.P. Morgan are also acting as bookrunners for the offering. DNB Markets, HSBC, SunTrust Robinson Humphrey, Wells Fargo Securities and Apollo Global Securities are acting as co-managers for the offering.