Shipping trust IPO launched at $1.50 per unit

MARINE financing firm First Ship Lease (FSL) has launched the initial public offering (IPO) of Singapore's second shipping trust - at 98 US cents, or S$1.50, per unit.

At this price, investors in the 220 million trust units on offer can expect an annualised distribution yield of between 8.7 per cent and 10 per cent over the next few years.

Of these, seven million are available to the public.

Another 120 million units representing 24 per cent of the trust have already been taken up by AIG Global Investment, DWS Investment and Penta Investment Advisers.

FSL will hold the remaining 32 per cent of the trust.

Singapore's first shipping trust was Pacific Shipping Trust, which was launched last May by Singapore's No. 2 container carrier, Pacific International Lines.

About US$319 million (S$488 million) will be raised from the FSL offer, of which almost all will be used to acquire the trust's initial fleet from its sponsor, FSL. The fleet of 13 ships will comprise container ships, product tankers, chemical tankers and dry bulk carriers.

These will be leased to international shipping firms. The ships have an average age of five years. Their leases have an average of nine years left.

FSL founder and chief executive Philip Clausius said the trust's independence from ship operators will help it grow in the fast-expanding US$5 billion ship lease financing market. The trust is looking to spend US$200 million a year on fleet additions.

FSL Trust is targeting an annualised distribution yield of 8.7 per cent this year. This will gradually be raised to 10 per cent for the first half of 2009.

Reflecting its confidence in the targets, FSL will give up half its entitled distributions to help the trust meet its distribution targets, if it falls short.

The offer will close on Thursday. Trading is expected to start next Tuesday.