Fortescue Metals Group Ltd. has completed an agreement with the China Development Bank Financial Leasing Co. Ltd. (CDB Leasing) to finance eight very large ore carriers (VLOCs) currently under construction. With Fortescue’s negotiations led by Ian Wells, company secretary, and Penny Stonier, funding manager, the agreement represents a significant partnership with CDB Leasing and is the largest direct funding arrangement provided by a major Chinese financier for a non-Chinese company in Australia. The finance lease facility funds 85% of the carriers cost for a minimum of 12 years on highly flexible terms, including early repayment and extension options. On delivery of each one, 85% of the payments will be drawn down on the finance lease facility.
“This is a groundbreaking financing transaction, which builds and broadens Fortescue’s highly valued relationships with China through our first direct funding arrangement with a major Chinese leasing company,” said Chief Executive Officer Nev Power. “We welcome this important partnership with CDB Leasing, which is a significant milestone in our financial strategy, further extending our debt maturity profile while strengthening our capital structure.”
The ore carriers are being constructed at China’s Jiangsu Yangzijiang and Guangzhou Shipbuilding International shipyards with the first delivery scheduled for November and the balance of the vessels through to mid-2018. Designed to complement Fortescue’s port infrastructure, the fleet will improve load rates, efficiencies and reduce operating costs, and when fully operational, will provide 12% of Fortescue’s shipping requirements.