Investor Relations News · Issue No. 2 · 2008 Seite 2
PerformanceNachrichten aus Financials Miscellaneos Ausgabe 1 · Januar 2008 Transport Finance
Strategy Up-to-date / Transport Finance Financials News Performance➜➜➜ Page 1 ➜➜➜ Page 6 ➜➜➜ Page 8
DVB's strategic positioning Editorial
Dear readers, With its products and 1. Mission Statement services, DVB Group is this issue of „Performance“ deals with DVB´s strategic positioning, uniquely focused on select We segment the global transport market into shipping, with up-to-date resolutions of segments of the international aviation and land transport. DVB is a highly specialised our Board and with DVB Group´s transport markets. niche player serving these transport segments. Financials 2007, which were commentated by Wolfgang Driese, CEO and Chairman of the Over the years, we have continuously enhanced our core skills. Essentially, we offer five kinds Board of Managing Directors, as of value-adding products and services to approximately 500 clients in Shipping, Aviation and follows: Land Transport. Leveraging DVB’s in-depth proprietary asset and market research, analysing „...DVB recorded a strong result transport means and operators as well as transport markets, we offer our clients a range of for 2007, despite a challenging value-added products comprising structured asset financing, equity sourcing and investments, market environment. Even risk distribution, advisory services as well as loan participations. though the retention of profits, to strengthen the Bank’s capital and finance its continued growth, Our business model is well-defined and unique, and for this reason our Mission Statement remains our priority, we plan captures both our real accomplishments and our vision of the future. to boost our shareholders’
participation in the Bank’s higher earnings. Our business model We are the leading specialist in international transport finance. – and our strict adherence to it – have shielded us against any direct negative impact of the crisis on financial markets.”
DVB – Setting the pace in transport finance. Not just a claim, but reality.
Best regards, Elisabeth Winter, Manager Investor Relations Page 2
PerformanceStrategy Up-to-date / Transport Finance Investor Relations News · Issue No. 2 · 2008 Financials News
2. Core products and services
Structured Asset Financing Drawing on our core service Structured Asset Finance, our three Transport Finance divisions offer financing solutions relating to transport assets. In addition to traditional asset finance, we offer our clients tailor-made structured and tax-optimised solutions for complex financing projects, often covering multiple jurisdictions.
Equity Sourcing und Investments Thanks to the extensive analytic output provided by our Asset & Market Research unit, and the resultant expertise regarding transport markets, we are an ideal partner for clients requiring equity capital and investors seeking suitable investment projects in the relevant sectors. This purpose in mind, our Investment Management division has launched funds in the areas of Shipping (NFC Shipping Funds), Aviation (Deucalion Aviation Funds), Cruise/Ferry Funds, Intermodal Equipment, and Rail Rolling Stock (Stephenson Capital). The funds put us in a position to offer our clients equity products to finance their investment projects.
Risk Distribution We usually employ our own capital when financing the assets of our Transport Finance clients. Notwithstanding this commitment, we syndicate portions of this lending volume – which can be substantial – to other financial institutions on the international banking market. Both for DVB and its clients, this placement of credit risks is important to ensure sufficient liquidity and adequate risk transfer.
Advisory Services DVB’s involvement in the value creation chain affecting the various transport sectors in the global transport market is not restricted to providing finance, but includes advisory services as well. In fact, we offer a range of advisory services for Shipping, Aviation and Land Transport clients, covering consultancy related to corporate acquisitions and divestments, strategic decision-making on finance and capital structure, refinancing, and the funding of acquisitions.
Loan Participations In 2007, we established our wholly-owned subsidiary, ITF International Transport Finance Suisse AG: the Zurich-based entity is actively participating in international senior asset-based lending.
Asset & Market Research Our Asset & Market Research unit provides the basis for the activities of our business divisions, leveraging the unit’s long-standing research know-how to provide financing products and advisory services, as well as optimising the raising of equity finance. Page 3
PerformanceStrategy Up-to-date / Transport Finance Investor Relations News · Issue No. 2 · 2008 Financials News
3. Enhancing DVB`s asset expertise and segment-specific services
Here is a detailed overview of DVB’s business divisions, business areas and the full range of products and services offered by DVB:
DVB - the asset specialist In 2007, DVB demonstrated that in addition to being a financing and advisory specialist, we provide our clients with services that focus closely on the specific assets of a given transport segment. Thus, we offer far more than the traditional range of banking services. Our asset- focused services are available to operators and investors, but also to our competitors.
Based in London, Aviation Asset Management provides our Aviation clients with a broad spectrum of services ranging from lease management, advisory, technical management and analysis to remarketing.
Further highly client-specific services covering • aircraft engines (TES Aviation Group, Cardiff) and • intermodal transport assets such as container boxes (Equipment Trading Platform of our Container Business Unit) help us gain even more intimate expertise with the nature of the various assets: literally, the ‘metal’ that we are dealing with. We offer our clients a unique profile of expertise, experience and competence in execution.
US capital markets products for Shipping clients Complementing the range of services is equity underwriting. Based in New York, our subsidiary DVB Capital Markets LLC holds a broker-dealer license, providing our Shipping clients with financial advice and supporting their efforts to raise capital in the US capital markets via underwritings, offerings and private placements of equity, debt and equity-linked securities. Page 4
PerformanceStrategy Up-to-date / Transport Finance Investor Relations News · Issue No. 2 · 2008 Financials News
4. DVB`s global presence and organisational structure
With offices in 13 pivotal locations, our business divisions Shipping, Aviation, Land Transport, Investment Management and ITF Suisse have a worldwide presence in the transport markets and their various segments. This global presence enables us to take into account the international dimension as well as the local specifics of the markets in which our clients operate.
On the 1st of January 2008, DVB’s Shipping division introduced a new organisational structure, focusing on the key shipping sectors. Our sector-specific organisational structure is unique in the global shipping industry. We felt encouraged to adopt the structure by the success of three teams of specialists set up in recent years: • Container Box Unit (2003); • Cruise Finance Unit (2005); and • FPSO Unit (Floating Production Storage and Offloading – 2006).
We came to recognise that the individual requirements of our clients can be served even better by taking a sector-specific approach. The new organisational structure facilitates the effort to further expand DVB’s expertise in select segments. Moreover, it will enable the Group to gain a truly global insight and assessment on each given sector. In this way, we build more competence to the benefit of our clients. Page 5
PerformanceStrategy Up-to-date / Transport Finance Investor Relations News · Issue No. 2 · 2008 Financials News
5. DVB’s competitive strengths
Our clients’ needs are closely tied to specific assets. Our particular strength derives from our ability to understand a client’s business model, and the assets employed, significantly better than the competition.
The client survey conducted in 2006 produced evidence that our key strengths lie in our know-how, our experience and our capacity to offer flexible solutions. We are considered among the “most knowledgeable, most experienced, most responsive and most flexible institutions” in the market. Our focus on assets puts us in a position to accompany our clients with sophisticated financing solutions at any stage of a sector’s business cycle. Complete dedication to the international transport industry makes us a reliable and long-term partner.
Our key competitive strengths distinguish us from other market participants:
• a unique focus on financing requirements in select sub-sectors of the international transport market;
• proprietary asset research in Shipping, Aviation and Land Transport;
• broad risk diversification within a given sub-sector;
• professionals with specialised expertise in financing issues and advisory competence geared to select sub-sectors; and
• highly efficient decision-making structures and our decentralised positioning in the international transport markets.
6. DVB´s consistent industry focus
DVB will consistently adhere to its strategic focus on selected transport market segments. Our aim is to continuously improve the efficiency of our products and services. We will take further steps to enhance a unique profile characterised by sophisticated asset know-how and special asset services. Page 6
PerformanceStrategy Up-to-date / Transport Finance Investor Relations News · Issue No. 2 · 2008 Financials News
Up-to-date: DVB Bank AG - Ad-hoc disclosure
On Thursday 10 April 2008 we published an ad-hoc disclosure, which comprised three essential Board resolutions.
“DVB Bank AG intends
• to increase its share capital; • to carry out a 10-for-1 share split; and • to merge its subsidiary DVB Bank N.V., Rotterdam, into DVB Bank AG, and to change its legal form to a European public limited-liability company (Societas Europaea – SE).”
The Board of Managing Directors (the Board) adopted a resolution in principle to increase the Company’s share capital from Authorised Capital 2006 to the extent that a total amount of about €150 million will be raised. The Board intends to issue the new shares at a subscription ratio of 6 to 1 (where shareholders are entitled to subscribe for one new share for six old shares), with the new shares carrying full dividend rights for the business year 2008. It is intended to enter into an agreement with DZ BANK, our mother company, according to which DZ BANK will underwrite the new shares, with the obligation to offer them to DVB´s shareholders for indirect subscription. The issuing price and further details will be determined and published by an ad-hoc disclosure at a later date.
Furthermore, the Board resolved to propose a resolution to DVB´s ordinary shareholders’ meeting to carry out a 10-for-1 share split. Financial Calendar Finally, the Board resolved to propose a resolution to DVB`S ordinary DVB Bank AG`s ordinary shareholders’ shareholders’ meeting, approving the merger of DVB Bank N.V. into DVB Bank meeting will take place on AG, with a concurrent change in DVB Bank AG’s legal form into a Societas Wednesday 11 June 2008 in Hermann Josef Abs Saal Europaea, including the corresponding amendments to its Memorandum and in Frankfurt/Main. Articles of Association.
The dividend payment will proceed on 12 June 2008. The Supervisory Board approved the resolutions set out on 10 April 2008. The implementation of these resolutions is coordinated in respect of content and time schedule. Page 7
PerformanceStrategy Up-to-date / Transport Finance Investor Relations News · Issue No. 2 · 2008 Financials News
Financials 2007 Another record year!
On 19 February 2008 we published DVB Group´s preliminary, unaudited financials 2007. Today - 14 April 2008 - our Press and Analyst Conference on annual results takes place in Frankfurt/Main, reporting audited figures.
Enclosed please find a synopsis of most important facts and figures of the passed business year:
2007 was the fourth year during which DVB’s income was generated exclusively from its international Transport Finance business. The result from ordinary activities before tax was up a significant 16.9%, to €118.7 million, confirming the success of our unequivocal strategic focus. Our earnings climbed 17.3% to €266.1 million. Net interest income after loan losses was up 28.8%, to €169.6 million, and net fee and commission income rose 17.0%, to €84.8 million.
The following key elements characterised DVB’s business in 2007:
• Strong growth in new international Transport Finance business, with 256 new transactions and an aggregate volume of €7.09 billion. • A leading position in 69.4% of transactions in the overall portfolio, and in 67.0% of new transactions. Awards • Expansion of the Aviation platform, including the acquisition of a majority stake in Aircraft Debt Deal of the Year - Africa TES Aviation Group. ING & our business division Aviation Finance for Ethiopian PDP • Expansion of Investment Management activities: - CIF 3, an investment fund advised by DVB Bank, acquired Capital Lease Limited, Rail Finance House of the Year Hong Kong, the world’s 8th largest container leasing company, and simultaneously Our business division Land Transport Finance on-sold the management rights to Capital Lease’s 0.5 million TEU container fleet to Textainer Group, San Francisco, USA. US Rail Deal of the Year - Buss Capital and DVB jointly launched a Cruise Shipping fund. Our business division Land Transport - Stephenson Capital was launched as the first rail investment fund. Finance & CIC for ARI Second LLC • Preparations for launching an innovative organisational structure in Shipping Finance, Shipping Debt Deal of the Year – Europe effective 1 January 2008. Our business division Shipping Finance & GE for Sevan Marine ASA DVB´s expertise in the international transport finance markets was recognised by Jane´s Transport Finance with several awards in 2007 (see box on the left). Page 8
PerformanceStrategy Up-to-date / Transport Finance Investor Relations News · Issue No. 2 · 2008 Financials News
DVB's most important Aviation transaction 2007
DVB Bank AG closed a milestone transaction on November 30th for the purchase of 8 new Boeing 777-200 LRF aircraft, delivering 2009 through 2010 with operating leases to AeroLogic, a joint venture cargo airline created by Lufthansa Cargo and DHL Express. Owner and lessor of the aircraft is Deucalion Capital VII Limited (“DC VII”), an aviation fund advised and managed by DVB Bank AG.
DVB Bank acted as Global Lease Arranger in this transaction. Deutsche Bank, KfW IPEX-Bank and DVB acted as joint arrangers/underwriters of a US$600 million PDP loan facility provided to DC VII to support its pre-delivery payment obligations under the purchase agreement with Boeing.
This is the largest transaction ever arranged by DVB. Based on Boeing’s escalated list prices, the aircraft are valued at approximately US$2 billion.
The Aircraft The 777-Freighter will feature unmatched capacity and range for a twin-engine freighter and is designed to facilitate seamless interlining with the 747-Freighter. With a maximum takeoff weight of 766,000 pounds (347,450 kilograms), the 777-Freighter will have a revenue payload capability of more than 226,000 pounds (103 metric tons). The 777-Freighter will be capable of flying 4,885 nautical miles (9,045 kilometers) with a full payload, making it the world’s longest- range freighter. In addition, the 777-Freighter will meet QC2 noise standards for maximum accessibility to noise-sensitive airports.
AeroLogic GmbH The photo shows Charles Aerologic GmbH is jointly owned by DHL Express and Graham, Chief Executive Lufthansa Cargo AG, with each company holding a Officer DHL Aviation, and Carsten Spohr, CEO and 50 per cent stake. The airline, which was founded in Chairman of Lufthansa Cargo September 2007, is based at Leipzig/Schkeuditz. The AG, after having launched the company currently has about 20 employees. In all, new cargo carrier “AeroLogic” AeroLogic is expected to generate about 250 new jobs, roughly 200 of which will be for cockpit crew. Page 9
PerformanceStrategy Up-to-date / Transport Finance Investor Relations News · Issue No. 2 · 2008 Financials News
By 2012, the AeroLogic fleet will encompass eleven leased Boeing 777-200LRFs, the first four of which are scheduled for delivery at the beginning of 2009. Four more freighters will follow in 2010, a further two in 2011. AeroLogic plans to add a reserve aircraft to the fleet in 2012. AeroLogic’s cargo capacities will mainly be used by DHL Express and Lufthansa Cargo. The two partners will also be responsible for sales and warehouse handling. Operations are being planned around both partners’ requirements: on weekdays, freighters will fly to Asian destinations in the express network operated by DHL Express. At weekends, they will supplement Lufthansa Cargo’s services. For customers of the parent companies, AeroLogic will mean more capacity, more flexibility, an expanded network and improved operating times. AeroLogic wants to achieve the goal of ranking among the top five cargo carriers in Europe.
Deucalion aviation funds to buy six B747-400 aircraft
Deucalion aviation funds has signed a Letter of Intent with Air France to acquire forward six Boeing 747-400 passenger aircraft for delivery in 2009 and 2010. Deucalion will convert the aircraft to full freighters at the IAI/Bedek conversion facility with the first aircraft expected to be available as a converted freighter from September 2009. The marketing of the aircraft as freighters is being undertaken by DVB. Air France will replace the aircraft, which will be delivered to Deucalion, with new twin engine Boeing 777 aircraft for long haul passenger operation. Page 10
PerformanceStrategy Up-to-date / Transport Finance Investor Relations News · Issue No. 2 · 2008 Financials News
DVB in the press
DVB's Shipping Research All of these markets are subject to constant change. For Team commands sound instance, a constant supply of newly-built super-sized market expertise on any crude oil tankers over the coming years will be offset by type of vessel, whether it be a growing rate of older ships leaving the market, as some chemical tankers, VLCCs, or shipowners anticipate better market potential in converting offshore supply vessels. their vessels to VLOCs (very large ore carriers).
Ever-rising oil prices continue to benefit offshore exploration activity for new oil and gas sources. Increasing production will not only boost demand for drilling and production equipment, but also for the special support vessels required in offshore production, such as platform supply vessels or anchor handling tugs. Also, the current boom in demand for biofuels – also triggered by high oil prices – currently benefits operators of chemical tankers, due to rising exports of vegetable oils or plant-based fuels from Argentina and Brazil. DVB’s forecasts for these segments were featured in regular press coverage.
The ‘credit crunch’ was another buzzword in the media over recent months. In an interview with Leasing Life, an industry publication, Bert van Leeuwen, Head of DVB’s Aviation Industry Research unit, commented upon the impact of current developments on aviation finance providers: “While the impact of the credit crisis on aircraft financing is certainly palpable, it hasn´t been dramatic. (…) A few non-specialist financiers have scaled back their expansion plans or dropped out of the market. The vast majority, however, still have sufficient room for aircraft deals, albeit the margins have increased to reflect the new market reality. With a market at or close to its peak level, most experienced aerospace bankers realize this is not a time to create time-bombs by accepting too aggressive conditions in terms of high asset risks.”
Katrin Berkenkopf, who regularly covers shipping finance houses for Lloyd’s List, summarised the views of Dagfinn Lunde, member of DVB’s Board of Managing Directors, on the ‘credit crunch’ and the outlook for shipping markets. Ms Berkenkopf’s article is shown below: Page 11
PerformanceStrategy Up-to-date / Transport Finance Investor Relations News · Issue No. 2 · 2008 Financials News
DVB warns ship prices at risk from credit crisis
The credit crunch from the US mortgage crisis and slower growth in India and China will bring ship prices down, said Dagfinn Lunde, managing board member of German transport finance specialist DVB Bank.
“Ultimately we are seeing a slowdown in orders for new vessels and we also expect oversupply in many sectors to hit the market earlier than otherwise expected. This can mean we get a more serious slowdown in 2009 instead of 2010,” says Mr Lunde. Decelerating growth in Asia, particularly in China, is likely to bring a reduction in charter rates and asset prices, Mr Lunde says. “If we look at China, we see growth estimated at 10% in 2008 whereas in 2007 it was 11.4% and in 2006 11.1%.”
According to figures from the International Monetary Fund, world growth was expected to slow down to 4.1% in 2008 compared to 2.9% in 2007 and 5% in 2006.
“The decrease in demand for the shipping industry will leave additional vessels on the market. If there is a surplus of vessels then we may face a similar scenario as we did in the past where vessels were put out of service.”
A possible recession in the US would also affect the shipping market. But DVB Bank views the immediate shipping prospects for 2008 in rosier terms. “In general we will see a continued demand for shipping in the near future,” Mr Lunde says.
The bank is expecting good times for the off-shore market, which it says will enjoy continued success with production and exploration.
“We do expect the demand for container vessels to continue along a yearly 8% to 11% growth rate curve,” Mr Lunde says, but he adds that the fact that the containership orderbook stands at 62% of the worldwide fleet is particularly ominous given the avalanche of newbuildings the fleet has seen in the past 18 months.
Imprint
Performance - Investor Relations News DVB Bank AG Friedrich-Ebert-Anlage 2-14 60325 Frankfurt/Main Germany
Editorial team: Investor Relations Elisabeth Winter +49 (0)69 97 50 43 29 [email protected]
Sabine Schlieben +49 (0)69 97 50 44 49 [email protected]