Cosco Pacific in $250m sale and leaseback deal
Hong Kong-listed port operator, container manufacturing and leasing company Cosco Pacific has agreed to sell and lease back a fleet of containers to Commonwealth Bank of Australia for up to $250m.
Cosco Pacific, which controls the world’s second-largest container leasing firm Florens, did not disclose the volume of the containers to be sold but said the total sale price will not exceed $250m and the net proceeds from the sale will be at around $4.2m.
The assets to be sold generated a net profit of around $3.4m last year, said Cosco Pacific in an announcement on Wednesday.
The company operated a fleet of 1.52m teu at the end of last year, of which 762,618 teu were managed boxes, according to its 2007 annual report. Its box leasing, managing and selling business contributed $118m in net profit last year.
The firm said it will use the proceeds as general working capital and for funding future investment projects. Cosco Pacific has projected its capital expenditure this year to be more than $1bn, of which $608m will be invested in the terminal business. Its capex was $841m in 2007.
Cosco Pacific said it plans to lease back the boxes for five years and will be granted an option to extend the lease by a further five years. This is differs from Cosco Pacific’s previous box-selling deals, where the firm sold its containers but continued to manage the boxes for the buyers instead of leasing them back.
“The lease-back of the marine containers … allows the group to retain commercial control of the marine containers and hence to sublease them to customers and generate and retain the earnings generated from such subleasing over the period of lease,” said vice chairman Xu Minjie..
The deal was described as an “innovative financial arrangement” by industry analysts.
“We think the transaction is likely to be regarded as financial lease and the substance of the transaction is to allow Cosco Pacific to borrow US$250m at a very competitive cost of funds. We need to confirm with management on this point,” said Geoffrey Cheng, director of equity research of Daiwa Institute of Research (HK) Limited.
Cosco Pacific, which controls the world’s second-largest container leasing firm Florens, did not disclose the volume of the containers to be sold but said the total sale price will not exceed $250m and the net proceeds from the sale will be at around $4.2m.
The assets to be sold generated a net profit of around $3.4m last year, said Cosco Pacific in an announcement on Wednesday.
The company operated a fleet of 1.52m teu at the end of last year, of which 762,618 teu were managed boxes, according to its 2007 annual report. Its box leasing, managing and selling business contributed $118m in net profit last year.
The firm said it will use the proceeds as general working capital and for funding future investment projects. Cosco Pacific has projected its capital expenditure this year to be more than $1bn, of which $608m will be invested in the terminal business. Its capex was $841m in 2007.
Cosco Pacific said it plans to lease back the boxes for five years and will be granted an option to extend the lease by a further five years. This is differs from Cosco Pacific’s previous box-selling deals, where the firm sold its containers but continued to manage the boxes for the buyers instead of leasing them back.
“The lease-back of the marine containers … allows the group to retain commercial control of the marine containers and hence to sublease them to customers and generate and retain the earnings generated from such subleasing over the period of lease,” said vice chairman Xu Minjie..
The deal was described as an “innovative financial arrangement” by industry analysts.
“We think the transaction is likely to be regarded as financial lease and the substance of the transaction is to allow Cosco Pacific to borrow US$250m at a very competitive cost of funds. We need to confirm with management on this point,” said Geoffrey Cheng, director of equity research of Daiwa Institute of Research (HK) Limited.