CURRENT AND FUTURE DEBT FINANCING MARKET OF PORTS AND TERMINALS. PFI Antwerp, 2016 by William Holme

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1 CURRENT AND FUTURE DEBT FINANCING MARKET OF PORTS AND TERMINALS PFI Antwerp, 2016 by William Holme

2 Agenda Section 1 Section 2 Short introduction to DNB Bank and capital market finance trends 2

3 DNB is a primarily a Norwegian bank, but also a leader in selected industries on a global basis DNB is the market leader for domestic lending in Norway 20 international offices in strategic geographic locations including London, New York & Singapore DNB Group Locations Internationally has long-term focus on specific industries with significance to the Norwegian economy: Energy Seafood Maritime Shipping Offshore Ports & Terminals 3

4 DNB has a dedicated global ports and liquid storage terminals financing group Global Logistics Group is a team of dedicated professionals to the port and terminal sector located in London, New York and Singapore Global knowledge and client base: - Globally diversified loan portfolio - Relationships include the largest container terminal and liquid storage terminal operators - Total commitments to the industry ~ USD 1.5bn with over 70 loan transactions completed Wide bank debt and capital markets offering Selected locations of financed terminal projects, and port companies - Full bank debt offering including project, acquisition and corporate loan capabilities - Capital markets capabilities in US, Europe & Nordics - Complemented by port M&A Primarily focussed on the main industrial terminal sectors Container terminals Liquid bulk terminals Dry bulk terminals 4

5 DNB is an active lender to the ports and terminals sector HES International Acquisition of 43% of EMO Term loan B: EUR 85,000,000 Bookrunner Bank; EUR 15,000,000 MLA and Bookrunner Antwerp Gateway NV EUR Mandated Lead Arranger & Financial Advisor Total Terminals International, LLC USD 320,000,000 MLA and Joint Bookrunner Gate terminal B.V. LBBR Expansion Facility EUR 76,500,000 MLA Hestya acquisition of HES Beheer NV Term loan B: EUR 250,000,000 Bookrunner Bank; EUR 65,000,000 MLA and Bookrunner HES Beheer N.V. ATIC Acquisition EUR 110,000,000 Arranger and Documentation Agent London Gateway LGTT Facility GBP 100,000,000 Lender Carrix Inc Amended & Restated Credit Agreement MLA, Facility and Documentation Agent DP World RCF USD 3,000,000,000 MLA LBC Tank Terminals Bank: USD 396,000,000 Bookrunner & MLA US Bond: USD 350,000,000 Joint-Bookrunner DP World (Canada) CAD 150,000,000 MLA and Documentation Agent IMTT (US/Canada) & IMTT-Finco, LLC. Revolver USD 1,500,000,000 & Bond USD 182,881,079 Participant Gujarat Pipavav Port Limited APM Terminals Callao S.A. GPPL (India) USD 152,000,000 IFC B-loan lender GCT Global Container Terminals Inc. USD 1,020,000,000 Senior Loan Bookrunner Nava Sheeva (India) Gateway Terminal USD 160,000,000 MLA, Facility and Documentation Agent APM Terminals Callao S.A. (Peru) USD 217,000,000 IFC B-loan lender DP World Callao SRL (Peru) USD 350,000,000 MLA, Facility and Documentation Agent

6 Agenda Section 1 Section 2 Short introduction to DNB Bank and capital market finance trends 6

7 Banks continue to support the port sector, although debt volumes declined in 2015 Bank financing volumes in the sector remain high, with actual levels well in excess of those reported Volumes are primarily driven by certain large transactions, refinancings and corporate RCFs; 2013 and 2014 volumes inflated by a large number of refinancings of deals originally closed in 2006 and 2007 Available information on bank financing transactions relates primarily to larger bank club and syndicated transactions (e.g. Koole, Pisto, Carrix, Peel Ports) Less projects/acquisitions brought to the bank market in 2015 Gross reported lending to the Ports & Terminals sector since 2013 as stated in publicly available sources, including Dealogic and Loan Radar 7

8 Increasing debt capital markets volumes directed at the sector Debt capital markets activity in the sector has consistently risen over the last 3 years Debt capital markets investors are attracted to the stable long-term cash flow profiles of ports and terminals Debt capital markets volumes have been targeted at both Investment Grade and sub-investment Grade companies, albeit significantly larger volumes have been placed via investment grade products Debt capital markets financings have been used to take out bank debt (both acquisitions and newly operational projects) 4,400 4,200 4,000 USD M 3,800 3,600 3,400 3, Ports & Terminals 2015 Source: DNB Research 8

9 Selection of recent DCM transactions shows diverse product and jurisdiction mix # Name Country Region Terminal Sub Sector Finance Type Total Debt ($ USDm) Close DNB 1 PSA International Singapore Middle East/Asia Container Bond 500 Apr-16 2 Global Ports Russia Europe Container Eurobond 350 Apr-16 3 London Gateway UK Europe Container PP 820 Mar-16 4 Deloports Russia Europe Multipurpose Bond 46 Nov-15 5 VTTI MLP US North America Liquid storage US PP 440 Sep-15 6 ABP Holding UK Europe Multipurpose US PP 160 Jun-15 7 Adani India Middle East/Asia Multipurpose US Bond 650 May-15 8 DP World Dubai Middle East/Asia Container US Bond 500 May-15 9 HES International Netherlands Europe Dry bulk / liquid storage Term loan B 100 May-15 DNB 10 IMTT US North America Liquid storage US PP 600 May Stolt Nielsen Norway Europe Shipping / liquid storage Nordic Bond 180 Mar-15 DNB 12 Hutchison PH Hong Kong Middle East/Asia Container US Bond 1,000 Mar NSW Ports Australia Australasia Multipurpose US PP 300 Mar Stolt Houston US North America Liquid storage US PP 250 Feb Odfjell Norway Europe Shipping / liquid storage Nordic Bond 70 Dec-14 DNB 16 Sunoco Logistics US North America Liquid storage US Bond 800 Nov-14 DNB 17 HES International Netherlands Europe Dry bulk / liquid storage Term loan B 300 Sep-14 DNB Transactions have a wide geographic spread Source: DNB Research Diverse mix of port and terminal sub-sectors Investment Grade instruments: US PP, Investment Grade Bonds Sub Investment Grade instruments: Term Loan B, High Yield Bonds 9

10 Numerous different financing structures observed, driven by finance demand trends There have been 4 main uses of financing in the ports and terminals market in the past 2-3 years: - Expansion Projects (greenfield and brownfield) - Acquisitions - Refinancings - General Corporate Facilities / Corporate RCFs Within each of the above groupings are a number of different circumstances and drivers that shape the course of the financing - Facility Structure - Suitability and ability to support of different financiers 10

11 Limited new greenfield terminals, but many expansions, most of which require bank debt Limited number of completely new greenfield terminal constructions requiring traditional project financing - Limited suitable space for such developments, particularly in developed regions - Lower number of new long-term contracts with high quality offtakers (e.g. oil majors) However, numerous expansions and new developments at existing terminals - Phase II obligations, optimisation of existing terminal land Bank debt is the most efficient source of financing for standalone financings of this nature due to cost-of-carry considerations - Banks can commit funds that are undrawn for a period of time; institutional investors require full margin for return requirements - Institutional investors value cash flow visibility; many do not take construction risk Many combinations of debt capital markets and bank financing tranches 11

12 Terminal market was characterised by M&A in 2015 Over 30 M&A transactions in the Ports & Terminals sector in 2015 Large numbers driven primarily by Liquid Storage (e.g. Koole, STR, CLH, VTTI) and Container (e.g. TCB, Prince Rupert, Montreal Gateway) Transactions were spread throughout the year and include individual terminal acquisitions, acquisitions of minority shareholdings and full corporate acquisitions A number of recent acquisitions financed from cash or general corporate facilities of the acquirer, rather than debt Number of Transactions Q Q Q Q Total Ports & Terminals Liquid Storage Container Source: DNB Research 12

13 M&A driven by some clear main trends, which are expected to continue into 2016 Liquid Storage Oil Major divestment (Total & BP among others) Major Operators rationalising portfolios in order to redeploy capital to higher return investments (Vopak, Oiltanking) Incumbent fund and private equity investors seeking to capitalise on a strong market to sell out of investments at attractive valuations (EQT/Koole) Infrastructure market for equity investments remains very competitive larger liquid storage platforms are now regarded as quasi infrastructure Container Terminals Some major operators focussed on strategic growth (APMT, DP World) Conflicting strategies of Container Liners 13

14 High level of M&A has resulted in numerous acquisition financings of diverse structure Acquisition facilities represent a broad range of structures based on individual transaction specifics only common factor is often time constraint Single terminal with limited / no offtake contract too small for capital markets; may be financeable by some local / relationship banks Single terminals with long-term offtake contracts with creditworthy parties are financeable by a number of sources depending on size (capital markets require minimum size transactions), but are increasingly rare, even on a sale and leaseback structure Larger diversified platforms open up a wide range of options - Quasi - Infrastructure characteristics? - Diversification of products, customers, locations, contracts Large number of acquisitions are driven by potential expansion, and therefore combine whichever acquisition structure with a capex facility element on top 14

15 Conclusions and outlook for port and terminals financing market in 2016 and beyond Bank and capital markets remain supportive of the sector and this trend is expected to continue However, there are certain risk factors that may affect pricing and availability - Central bank policy in different jurisdictions will affect the availability of financing; already a slight divergence between USD & EUR availability - Uncertainty surrounding global economy and certain key risk factors (notably commodity prices) will directly impact spreads and availability in the capital markets M&A expected to remain a significant driver of the ports and terminals financing market - Liquid and container M&A trends expected to remain (e.g. BP Amsterdam, Navigator Terminals) - Continuing demand for assets among infrastructure investors looking for long-term stable cash flows 15

16 Disclaimer The presentation is based on information believed to be reliable, but DNB Bank ASA ( DNB ) does not represent that the information in the presentation is accurate or complete, and it should not be relied upon as such. Any opinions expressed reflect DNB Bank ASA's judgment at the time the presentation was prepared and are subject to change without notice. The presentation is not to be construed as a representation or solicitation to buy or sell any financial instrument. No liability whatsoever is accepted for any direct or consequential loss or expense arising from the use of this presentation. DNB Bank ASA and/or its affiliated companies and/or its officers, directors and employees may be a market maker or hold a position in any instrument or related instrument discussed in this presentation, and may seek to perform financial advisory and banking services related to such instruments. Confidentiality rules and internal rules restricting the exchange of information between different parts of DNB may prevent employees of DNB who are preparing this presentation from utilizing or being aware of information available in DNB and/or affiliated companies and which may be relevant to the recipients decisions. This presentation is for clients only, and not for publication. DNB Bank ASA is registered in Norway number NO (the Register of Business Enterprises). 16

17 William Holme Vice President, DNB Bank ASA T: M: E: 17