OK, OASIS is a wonderful ship but it costs $1.4 billion. How do we pay for it?
We’ve just publicly answered that question. With most ships, we borrow 80% of the contract price and we fund the remaining 20% plus the non contract expenses (architects, interest, owner supply, etc.) from our operating cash flow. Normally, we arrange that borrowing a few months before delivery and – normally – this is a relatively easy process. But, in case anyone missed it, these are not normal times and normal financing is abnormal today.
Fortunately, we have a few advantages over most companies. Most importantly are the relationships we have established over decades of working with others. In addition, we always make contingency plans in case of abnormal times.
In this case, the relationships I am talking about are with our commercial banks, the shipyard and the Finnish government and agencies. As we have just announced, we have finalized financing commitments for the 80% financing. And we have been paying the equity portion as we go out of operating cash flow. The banks in the deal are NORDEA, SEB, and BNP. Our relationship with these banks and many of their executives goes back as much as 35 years; some to when I was a junior financial analyst. Our relationship with the shipyard and Finland goes back over 40 years to when the company ordered its first ships in 1969.
In this case, our contingency plan included a guarantee from FINNVERA, the Finnish export credit guarantee agency who originally agreed to guarantee 80% of the financing and subsequently raised that to 95%. Armed with the FINNVERA guarantee and funding from Finnish Export Credit. Ltd., we were able to finalized the deal and announce it earlier this morning. We completed the deal somewhat earlier than usual because of all the turmoil in the market and the uncertainty that caused.
I know there were many observers who thought we would have trouble arranging this financing. After all, banks are not lending to each other; why would they lend a billion dollars to us? But we always thought those concerns were naïve – those naysayers underestimated the financial value of the ship; they underestimated the strengths of our relationships with Finland and with our bankers; and they underestimated the determination and ability of our team to make it happen. My hat is off to Brian Rice our CFO and to Antje Gibson our VP, Treasury.