| |
| |
![]() |
| |
|
| |
|
| |
|
SINGAPORE: Shipping trusts had previously been seen as safe havens for investors in volatile markets. But analysts said such trusts may face rough seas due to the current financial crisis.
While yields may presently be as high as 30 per cent, shipping trusts could be exposed to refinancing risks as equity and capital markets are being tightened.
There are currently three shipping trusts traded on the Singapore Exchange.
These trusts typically lease vessels for between five and 12 years. Even though this suggests a stable stream of earnings during that period, the current weakening of the shipping sector means these earnings may now be at risk.
The finances for ship acquisitions that shipping trusts secured earlier may also be affected by the global financial turmoil.
Rigan Wong, associate, Citi Investment Research, said: "However remote the possibility, we can't discount it. Un-drawn credit facilities may be withdrawn or agreed interest rates may actually rise unexpectedly. That increases the risk of investing in a shipping trust because now there is a greater degree of unpredictability."
Shipping trusts pay out between 75 and 90 per cent of their distributable income to unit holders, leaving them with few reserves to fall back on.
Selling more units to tap equity markets is not an option as trusts would then have to pay out more from their limited reserves to maintain yields.
Philip Clausius, CEO, FSL Trust Management, said: "Our current trailing yields are so high, making our cost of capital so high that you simply cannot structure accretive transactions.
"So, we think it is most prudent in this environment to do nothing for a while, protect what we have and continue delivering what is a very attractive yield to our equity investors."
Analysts said the trusts could raise cash by selling vessels, but the recent financial turmoil has seen the value of such assets fall.
- CNA/so
|
