South Korean shipowners Polaris Shipping and SK Shipping have turned to the bond market to generate funds for working capital as the dry bulk sector continues to improve.
Polaris Shipping issued KRW80 million (USD72 million) worth of bonds in January, May, and June and will issue another KRW60 billion in bonds on 20 September.
KB Securities will handle the launch of Polaris’ latest bond issuance, which could be in two series of KRW30 billion.
Polaris is considering a maturity of one year and two years for each of the series.
The company had planned an initial public offering for some time, but this was delayed first by deterioration in the dry bulk segment from 2015–16 and then by the sinking of the company’s VLOC Stellar Daisy in March 2017. It is hoping to go public this year, having recovered to a KRW6.7 billion profit in the first quarter of 2018 from a KRW28.6 billion loss in the first quarter of 2017.
SK Shipping is part of the SK chaebol that issued KRW136 billion in bonds this month. The bonds mature in 1.5 years and pay an annual interest of 0.66%.
Polaris and SK Shipping have secured long-term shipping contracts with Brazilian miner Vale and have ordered VLOC newbuildings to service the contracts.
Polaris has 18 VLOCs under construction with Hyundai Heavy Industries that are scheduled for delivery from June 2018 to May 2022.
Polaris owns the world’s largest fleet of VLOCs and, with Vale set to issue more consecutive-voyage charters, the company could order more newbuildings.
SK Shipping is primarily the transportation arm of the SK group, transporting cargoes to support the operations of its affiliates, namely SK Energy and SK Gas. For the first half of 2018, SK Shipping incurred a KRW19.7 billion loss, dragged down by weak tanker rates, compared with a KRW4 billion profit in the first half of 2017.
The company’s dry bulk division transports coal and iron ore under a mixture of long-term and short-term contracts for customers such as Korea Electric Power Corporation and steel mills POSCO, Nippon Steel & Sumitomo Metal Corporation, and China Baowu Steel. In addition, SK Shipping is building two VLOCs at Dalian Shipbuilding Industry and, upon delivery in early 2020, it will service a long-term contract of affreightment with Vale.