The Hidden Loans That Sank Nanjing Tanker

A SPECIAL INVESTIGATION lloydslist.com | Monday May 26, 2014 Leading maritime commerce since 1734

The hidden loans that sank Nanjing Tanker

A special Lloyd’s List investigation goes behind Nanjing Tanker’s great wall of obfuscation to examine how off-balance-sheet syndicated loans brought the Chinese tanker giant to its knees

off-balance-sheet loans drawn The following investigative article is published in collaboration between 2005 and 2008, a with Caixin, a Beijing-based business publication owned by Caixin Media. The collaboration with Caixin represents a first Lloyd’s List investigation for Lloyd’s List with any publication, and, more importantly, reveals. a first for Lloyd’s List in China, now the key centre of Some $1.3bn in loans was global shipping. Caixin is dedicated to producing independent NANJING Tanker Corp, China’s funnelled into Nanjing Tanker investigative news and analysis of China’s markets, politics, first state-owned enterprise by 19 banks in 11 countries to businesses, culture, environment, media, and law. A Chinese to lose its stock market fund the Chinese carrier’s fleet language version of the story by Lloyd’s List reporter Jing Yang listing following four years expansion during the shipping and Caixin Media reporter Wu Jing is published simultaneously of consecutive losses, has market boom. Commitment to on Caixin New Century Weekly magazine and caixin.com. been withholding information the borrowing, which financed Copyright of both English and Chinese version is co-owned by about a massive amount of 10 very large crude carriers Lloyd’s List and Caixin Media. debt in the form of long-term, and 10 medium-range product

www.lloydslist.com Lloyd’s List 1 tankers, is one of the major NANJING TANKER NET PROFIT reasons the company is now facing insolvency. 1,000.00 The 20 vessels and the debt obligations attached to them 0.00 amount to a non-disclosed book — a kind of shadow -1,000.00 balance sheet — worth at least $3.5bn (Yuan21.6bn), -2,000.00 overwhelming the size of the company’s existing balance -3,000.00

sheet. However, Nanjing Million Yuan Tanker, 55% owned by state -4,000.00 giant Sinotrans & CSC Group, never made a full disclosure to -5,000.00 the Shanghai Stock Exchange regarding the 20 off-balance- -6,000.00 sheet transactions, all of which were priced during a rising -7,000.00 market and contracted on 2007 2008 2009 2010 2011 2012 2013 terms that carry non-negotiable Source: Company disclosure, compiled by Lloyd's List payment obligations and cannot be cancelled. As of late-April, the company the country’s third-largest Nanjing Tanker declined the years, it lists the SPVs, was effectively in default of shipping and logistics Lloyd’s List’s invitation to registered in offshore tax the off-balance-sheet loans, in conglomerate after China comment on the story, citing havens, only as counterparts in addition to carrying arrears on Ocean Shipping Group and sensitivity during the delisting charterparties, which appear its balance sheet. China Shipping Group. settlement period. as long-term time charters on The string of losses has Nanjing Tanker’s books. Shanghai delisting saddled Nanjing Tanker with The invisible The same model was debt. As of end-March, the off-balance-sheet leases replicated in December Backed by a national mandate company reported negative 2007 and September 2008 in to serve crude imports [see Yuan2.4bn in equity and Nanjing Tanker’s roots stem transactions that funded six Comment, Page 7], Nanjing Yuan15.7bn ($2.5bn) in total back to 1993 when it was more VLCCs and brought the Tanker leapfrogged to the top liabilities. founded as a coastal and total number of vessels off- ranks among the world’s tanker The Yangtze River-based inland river carrier for crude, balance-sheet to 20. players in less than a decade. company announced in product and chemicals. All of the 20 vessels are Hong However, the company now April 29 it had defaulted An asset swap and private Kong-flagged and held in 18 appears to have overextended on Yuan1.2bn in principal, placement by its parent, SPVs registered in Panama itself and taken on obligations interests and financing leasing Nanjing Changjiang Tanker Co and the British Virgin Islands. it could not meet. hires, and that it was “actively in 2007, transformed it into a The SPVs are registered as Nanjing Tanker, which negotiating with relevant VLCC and MR tanker operator. non-Hong Kong companies recorded four annual losses parties for an appropriate Among the assets swapped under Hong Kong Company between 2010 and 2013, is solution to the [default] from the parent company were Ordinance, together with their undergoing a 30-trading-day problems”. 10 MR tankers and four VLCCs mortgage and charge details. transitional period to settle However, a two-month long financed via syndicated loans Records at Hong Kong Marine its shares on the secondary Lloyd’s List investigation to special purpose vehicles, Department and Companies market. Its last day on the shows the company’s true whose function is to hold the Registry reveal the structures exchange is slated to be June 4. level of debt goes well beyond legal title of the vessels and and financiers of the long-term Listed in the Shanghai Stock what is shown on its balance service the borrowing and time charters. Exchange in 1997, Nanjing sheet and that even some of its repayment of loans. Between 2005 and 2008, Tanker’s share price closed at creditors are in the dark about But in Nanjing Tanker’s stock Calyon Asia Shipfinance, Yuan0.7 on Friday, compared its true debt position. exchange filings throughout Societe Generale Asia, Royal to the peak of Yuan14.52 in Bank of Scotland and BNP 10 January 2008. Nanjing Paribas acted as facility agents Tanker is the world’s sixth- for financing of the 20 vessels largest tanker owner by fleet THE HISTORY OF NANJING TANKER and as security trustees, or Nanjing Tanker’s long voyage to delisting size, according to Clarksons. June 4 2014 mortgagees, of these vessels The last trading day of Nanjing Tanker in the Shanghai Stock Exchange after delivery. The company operates some April 11 2014

Shanghai Stock Exchange decided that Nanjing Tanker was to be delisted aer a 30-trading day settlement 87 vessels totalling 8m dwt, period from 21 April In particular, Calyon, now March 20 2014

Nanjing Tanker reported Yuan 5.9bn net losses for the including 19 VLCCs, 33 MR year 2013 known as Credit Agricole April 18 2013 Nanjing Tanker reported Yuan 1.26bn net losses for the Corporate & Investment Bank, product tankers, and chemical year 2012.The stock was put under a listing suspension for three consecutive annual losses and asphalt tankers, its February 22 2013 Timeline facilitated loans for two VLCCs: Nanjing Tanker announced to book Yuan 2.1bn impairment charges over the 10 VLCC time charter contracts website shows. It has two May 16 2012 Yangtze Pearl and Yangtze Yangtze Diamond was delivered by Shanghai Jiangnan Changxing Shipyard carrying a daily time charter rate of of events VLCCs on order at state-owned $49,500 for 10 years Spring; and five MR Tankers: April 10 2012

Nanjing Tanker reported Yuan 789m net losses for the Guangzhou Longxue Shipyard. year 2011. The company restated its nancial statements CSC Brave, CSC Progress, CSC for the year 2010, which reversed Yuan 8.8m prots to Yuan 18.6m losses. Subsequently the stock was put Download an EXCLUSIVE under a delisting watch for two consecutive annual It is controlled by China losses Amethyst, CSC Crystal and CSC January 11 2012 Lloyd’s List graphic detailing Yangtze Rainbow was delivered by Shanghai Jiangnan Changxing Shipyard carrying a daily time charter rate of Cyanite. Changjiang National Shipping $49,500 for 10 years the timeline of events in the November 17 2011 (Group), which merged with Yangtze Splendor was delivered by Dalian Shipbuilding Nanjing Tanker story at Societe Generale Asia Industry Co, carrying a daily time charter rate of $38,000 for 10 years Sinotrans Group to form September 16 2011 www.lloydslist.com arranged loan for three Yangtze Crown was delivered by Shanghai Waigaoqiao Shipbuilidng Co, carrying a daily time charter rate of Sinotrans & CSC in 2009, $38,000 for 10 years VLCCs: Yangtze Bravery, June 10 2011

Yangtze Star was delivered by Shanghai Waigaoqiao Shipbuilidng, carrying a daily time charter rate of $49,500 for 10 years

March 2 2011

Nanjing Tanker reported Yuan 8.8m net prot for the 2 Lloyd’s List www.lloydslist.com year 2010 February 9 2010

Nanjing Tanker Corporation reported Yuan 4.2m net prot for the year 2009

January 12 2010

Yangtze Fountain was delivered by Jiangnan Shipyard, carrying a daily time charter rate of $38,000 for 12 years

May 26 2009

Yangtze Rhyme was delivered by Jiangnan Shipyard, carrying a daily time charter rate of $38,000 for 12 years

March 2 2009

Nanjing Tanker reported Yuan 596m in 2008 net prot

January 6 2009

Yangtze Spring was delivered by Shanghai Jiangnan Shipyard, carrying a daily time charter rate of $38,000 for 12 years

January 2009

Sinotrans Group China Changjiang National Shipping Group merged to create Sinotrans & CSC Group

October 10 2008

Yangtze Pearl was delivered by Shanghai Jiangnan Changxing Shipyard, carrying a daily time charter rate of $38,000 for 12 years

September 15 2008

Lehman Brothers led for chapter 11 bankruptcy protection, marking the onset of the global nancial crisis and the worst shipping industry depression in decades

September 3 2008

Nanjing Tanker signed loan agreement, time charter contract and Shipmanagement contract for four VLCCs, Yangtze Splendor, Yangtze Bravery, Yangtze Rainbow and Yangtze Diamond

March 5 2008

Nanjing Tanker reported Yuan 369.8m in 2007 net prot

December 21 2007

Nanjing Tanker signed loan agreement, time charter contract and shipmanagement contract for two VLCCs, Yangtze Star and Yangtze Crown

December 17 2007

Nanjing Water Transport Industry Co. completed assets swap with parent group, repositioned as a deepsea tanker operator. Company name was changed to Nanjing Tanker. Parent Nanjing Tanker was renamed as Nanjing Changjiang Tanker

June 11 2007

Nanjing Tanker signed loan agreement, time charter contract and shipmanagement contract for two VLCC, Yangtze Rhyme and Yangtze Fountain

May 16 2007

Nanjing Tanker, parent of Nanjing Water Transport Industry Co. signed loan agreement, time charter contract and Shipmanagement contract for Yangtze Pearl and Yangtze Spring two very large crude carriers

April 30 2006

Nanjing Water Transport Industry Co. signed a 10-year contract of areightment with Sinopec to carry crude imports into China

June 12 1997

Nanjing Water Transport Industry Co. floated its shares in Shanghai Stock Exchange

1993

Nanjing Water Transport Industry Co. was founded, based in the City of Nanjing and specialised in transporting oil and chemicals along the Yangtze River to China hinterland. It is part of China Changjiang National Shipping (Group) Corporation

Source: Lloyd’s List; public information Yangtze Rainbow and Yangtze NANJING CHARTERED TANKERS Diamond; and five MR Tankers: CSC Peace, CSC Friendship, CSC Name dwt Registered owner Mortgagee Technical manager Risingsun, CSC Auspicious and Yangtze Pearl 29,000 Agate Shipping CSC Najing Tanker CSC Coral. RBS administered deals for Yangtze Spring 297,557 Crystal Shipping CSC Najing Tanker two VLCCs, Yangtze Rhyme and Yangtze Rhyme 297,573 Aldebaran Shipping Royal Bank of Scotland NW Shipmanagemnet Yangtze Fountain; and BNP Yangtze Fountain 297,580 Betelgeuse Shipping Royal Bank of Scotland NW Shipmanagemnet Paribas for Yangtze Star and Yangtze Star 318,218 Nappa Shipping BNP Paribas NW Shipmanagemnet Yangtze Crown. Yangtze Crown 317,960 Napoleon Shipping BNP Paribas NW Shipmanagemnet Fifteen other banks, from China, Japan, South Yangtze Splendor 297,058 Nanjing D One Shipping SocGen Asia CSC Najing Tanker Korea, Singapore, Ireland, Yangtze Bravery 296,951 Nanjing D Two Shipping Société Générale CSC Najing Tanker Netherland, Canada, Sweden Yangtze Rainbow 318,506 Nanjing W One Shipping Société Générale NW Shipmanagemnet and Germany, also subscribed Yangtze Diamond 299,999 Nanjing W Two Shipping Société Générale NW Shipmanagemnet to the loans at different CSC Brave 45,853 Opal Shipping NW Shipmanagemnet portions, which together amount to $1.3bn in principal, CSC Progress 45,791 Jasper Shipping NW Shipmanagemnet according to a compilation of CSC Peace 45,886 Nanette Shipping Société Générale NW Shipmanagemnet company records. CSC Friendship 45,800 Nancy Shipping Société Générale NW Shipmanagemnet Mayer Brown JSM and Norton CSC Risingsun 45,904 Nantalis Shipping Société Générale NW Shipmanagemnet Rose acted as solicitors for CSC Auspicious 45,851 Nantalis Shipping Société Générale NW Shipmanagemnet the four security agents, or mortgagee banks, Companies CSC Coral 49,997 Nantalis Shipping Société Générale NW Shipmanagemnet Registry records show. CSC Amethyst 49,967 Olivine Shipping NW Shipmanagemnet While it is not mandatory to CSC Crystal 49,982 Citrine Shipping NW Shipmanagemnet disclose the full newbuilding CSC Cyanite 49,982 Garnet Shipping CSC Nanjing Tanker contract prices with the Hong

Kong Companies Registry Source: Hong Kong Marine department; Lloyd’s List Intelligence seven out of the 20 vessels include this information. The 29,700 dwt Yangtze as advance charter hire, a buyer, and CSCOT, or in some In addition, CSCOT and Splendor and Yangtze current assets account, on the occasions its parent Nanjing Nanjing Tanker each serve Bravery were contracted company’s balance sheet. Tanker, as construction as sales agent and standby at $116m; the 31,000 dwt supervisor. sales agent, obliged to sell Yangtze Rainbow and Yangtze While novation is not the vessels for the SPVs, the Diamond at $121.9m, with the The charterers’ obligation unusual, CSCOT and Nanjing registered shipowners, at the loan financing 80% of the Tanker, and in some cases end of the charter period. newbuilding costs. For the The deals all bear unusual various Singapore-registered Footnotes to Nanjing Tanker’s 46,000 dwt CSC Risingsun, aspects in international ship subsidiaries of CSCOT, were annual reports show the 20 CSC Auspicious and CSC finance practice. named as co-time charterers vessels carry a 10- or 12-year Coral, all held in one SPV, the CSC Oil Transportation, of the vessels, in conjunction charter periods, which are, in newbuilding price was $40m a Singapore-registered with management contracts effect, the periods of the loan each and the loan covered 90% subsidiary of Nanjing Tanker, signed between the SPVs, agreements. of the total cost. is shown as original buyer of CSCOT and Nanjing Tanker, The pre-delivery tranche of The rest of the costs were the vessels. The shipbuilding which stipulated CSCOT the loan was secured by refund funded by Nanjing Tanker, contracts were later novated and Nanjiing Tanker as both guarantee in favour of the governed under a subordinated between CSCOT and each of technical and commercial SPVs, with the post-delivery loan agreement and appeared the SPVs, with the SPVs the managers of the vessels. tranche, payable upon delivery

NANJING TANKER OFF-BALANCE-SHEET LENDERS

300 274.5 Principal, in $m

250

200 153.6 150 115.8 106 90.9 77 100 70 64 55 50 50 50 35 32 30 25 17 17 10 10 0

ING Calyon WestLB ScotiaBank Fortis Bank Bank of China BNP Paribas Bank of Ireland Societe Generale United Overseas Bank Royal Bank of Scotland Mizuho Corporate Bank China Development Bank China Construction Bank Korea Development Bank Bank of Tokyo-Mitsubishi UFJ Skandinaviska Enskilda Banken Overseas-Chinese Banking Corp

Industrial & Commerical Bank of China Source: Hong Kong Companies Registry, compiled by Lloyd's List

www.lloydslist.com Lloyd’s List 3 of the vessels, secured by standby charterers clause — between the SPVs and the to concerns over liabilities, 100% of the financed assets, or the structure also carries some trust, which ensures the which can be enormous. In the the vessels, together with the components rarely adopted vessels’ earnings are split case of crude oil tankers, the insurance coverage taken out by Chinese state carriers in between Nanjing Tanker and obvious concern is liability for for the vessels. sourcing financing, although the lenders,” said one source. pollution caused by an oil Twenty-one clauses list not uncommon in international “As the vessels are held in a spill. grounds for default. Except ship finance practice. charitable trust, technically “So SPVs are set up to for various stipulations on Non-Hong Kong companies the vessels have no beneficial limit liabilities and separate payment obligations and registered at the Companies owners.” ownership. Orphan trusts are status of the vessels, “any Registry are not obliged Still, such an arrangement typically used to deliver an material adverse change in to disclose shareholders does not exonerate Nanjing efficient tax structure, or in the financial condition of the information, only directors. Tanker, on the surface shipping finance, to finance time charterers” and failure of Corporate information the time-charterer, from assets through a leasing payment to the time-charterers’ at offshore tax havens is obligations to the vessels, structure without creating “creditors generally” both inaccessible to the public. according to another source. any of the liabilities of amount to default. Any breach However, three ship financing “Banks never want to legally ownership. would enable the lenders to sources familiar with the or beneficially own any vessels “In these instances, it’s terminate the contracts and the transactions told Lloyd’s List due to the risk involved, and common to establish a trust, resort to securities. the SPVs are ultimately held Nanjing Tanker wanted to which will own an SPV, and for In essence, the payment by a charitable or orphan trust make the deal off-balance- the financiers to lend into the obligation features a hell-or- registered in the British Virgin sheet. Still, the vessels have to SPV. The SPV will earn a small high-water clause normally seen Islands. be owned by some entity. So a profit, which will be passed in vessel chartering, meaning The trustees are BVI-licensed charitable trust structure was on to the trust, and probably that payments must be made lawyers and the beneficiary is a brought in to be the beneficial donated to charity.” regardless of any difficulties the charity. The trust owns a holding owner. But no matter what the In the SPVs, banks can debtor may encounter. company, which owns the structure is Nanjing Tanker finance up to 80%-95% of the SPVs. Directors of the holding still holds all the obligations,” newbuilding cost, on condition company are a mixture of according to a Hong Kong- that equity is in place. Equity Who is the real owner? lawyers at registration locations based ship financing expert. is typically paid in the form of the SPVs, such as the BVI and “Banks in general provide of advance rentals from the Except for the stipulation of co- Panama, and one or two Nanjing companies with lending only, charterers into the SPVs or the time charterers — as opposed Tanker executives. and shun ownership in ships, holding company of the SPVs, to the more commonly used “There is little cash flow or the financed assets, due according to the expert.

NANJING TANKER’S OBSCURED CHARTER STRUCTURE Shadow setup Finance

Shipmanagement contract Time charter contract Ownership Shadow relationship m

sheet transactions o c . BOARD OF DIRECTORS

BVI Panama Nanjing Lawyers Lawyers Tanker Executives

BANKS Loan HOLDING ORPHAN CHARITY COMPANY TRUST

Mortgage SPECIAL PURPOSE VEHICLE

NANJING NANJING CHANGJIANG CSC OIL NANJING CHANGJIANG SINOTRANS & OIL TRANSPORTATIONS TANKER 100% 100% 55% TANKER 100% CSC TRANSPORTATIONS

50%

NW SHIP 50% WALLEM SHIP MANAGEMENT MANAGEMENT

Source: Lloyd’s List

4 Lloyd’s List www.lloydslist.com “Without seeing the actual NANJING PREPAYMENTS AND TOTAL ASSETS contract, a reasonable 14% 15% Prepayments assumption can be drawn that 25bn 15% the time charterer could well Rest of assets be the beneficial owner of the vessels. It may not be stated in 20bn 17% an evident way, but obligations will be on the charterers.” Formerly known as Nanjing 15bn Water Transport Industry Co. 16% Ltd, Nanjing Tanker embarked Yuan on the transformation to become 9% a deepsea operator, after the 10bn opening of a 973 km long Sinopect oil pipeline in 2006 that eclipsed its business of carrying 5bn oil into China’s hinterland. Also in 2006, the company signed a 10-year COA with 0 Sinopec to deliver crude 2007 2008 2009 2010 2011 2012 imports into China, which Source: Company disclosure, compiled by Lloyd's List armed the company’s aspiration to grow. A Hong Kong-based ship bareboat charters are viewed 20 off-balance-sheet vessels, to one ship finance source, finance source familiar with as leases, therefore financing according to Lloyd’s List is “in truth repayment of the deal said: “Nanjing Tanker activities, which are the target Intelligence. The remaining principal and interest”. wanted to expand fleet size of regulation by Chinese five are managed by Nanjing Based on the disclosed daily after securing the COA with authorities. Tanker itself. rates, Nanjing Tanker is bound Unipec. This involves more “If an onshore company does to service a total of $1.7bn debt operation overseas, so it makes a bareboat charter back to The true level of over 12 years from October sense to have set-ups overseas PRC, it has to obtain a leasing indebtedness 2008, when the first vessel was like this. It also exerts much less licence from banking and delivered. Interest costs for the pressure on balance sheet.” foreign exchange authorities. In December 2013, Nanjing 10 MR newbuildings remain Without such a licence, the Tanker announced it booked unknown, but another figure Regulatory hurdles onshore lessee cannot make Yuan2.1bn impairment charges disclosed by the company may payments to an offshore on the charters, citing “an provide a gauge of the size of According to a third source, lessor. Even if the lessee is increasing likelihood that the the company’s book kept in the the purpose of the structure is an offshore subsidiary of an foreign shipowners would dark. to “blur the identity of the real onshore company, it still has terminate the contracts”. Also in December 2013, the shipowners”. to obtain approval from [the In a supplement company said it had agreed to The entire structure, State Administration of Foreign announcement in February, purchase all of the 20 vessels at including the arrangement of Exchange] for foreign exchange Nanjing Tanker disclosed the expiry of the time charters, a time charter together with a quota that provides guarantee charter rates of the 10 VLCCs, a common attribute in management contract, appears to the offshore subsidiary.” six at $38,000 per day and categorising a lease as finance like “an attempt to get around However, regulatory hurdles four at $49,500 per day. lease under International regulatory approval in China”, can be bypassed if the leases Although the timecharters Financial Reporting Standards. said the ship finance expert, are dressed up in time charters. were signed between May 2007 Nanjing Tanker said it who is not involved in the “If the onshore company and September 2008, actual would start accounting for deals. does a time charter back to exercise of the contracts could the 20 charters on its balance “When offshore banks China, even if such charter has not commence until the vessels sheet and estimated that the want to lend to onshore financing purpose included, hit the water between October purchase will expand both its companies, such a structure is the time charter will still 2008 and April 2012, after the total assets and total liabilities applied primarily to sidestep be treated as a commercial tanker market collapsed. by $910m (Yuan5.7bn). regulations in China,” he said. contract, therefore there bears The VLCC time charter Between 2007 and 2013, One of the uncommon no need of approval from equivalent rates skyrocketed to Nanjing Tanker paid a total of elements in Nanjing Tanker’s relevant authorities,” the over $140,000 per day in May Yuan16.1bn in debt repayment charter arrangement is the expert said. 2008 but plummeted a year dressed up as advance dual contract set-up. In each In July 2012, Nanjing Tanker later, according to the Baltic rentals. The combination of instance that a charterparty and Wallem Shipmanagement Exchange. VLCC TCE averaged both figures, amounting to was signed together with a formed a 50-50 joint at $12,255 per day in the Yuan21.8bn ($3.5bn), is the commercial and technical venture in Singapore, NW first quarter of this year. The rough size of the company’s management contract. Shipmanagement. Records operating cost for a VLCC in shadow book over the course Combining both may constitute at Singapore Accounting and 2012 stood at $10,350 per day, of 15 years, from the year first a bareboat charter. Corporate Regulatory Authority according to Moore Stephens. vessel delivered to the year Such an arrangement, show CSCOT, Nanjing Tanker’s Unlike normal time charters, the charter period ended according to the expert, may be local subsidiary and one of the in which the shipowner pays on the last vessel delivered. an attempt to evade regulatory co-time charterers, is the direct for capital and operating costs In contrast, as of end-2013, approval. shareholder of NW. of the vessel, and the charterer Nanjing Tanker reported total “This is a grey area of NW is the technical pays for voyage costs, the time liabilities exceeding total regulation. Regardless of manager of six VLCCs and charter hires paid by Nanjing assets by Yuan2bn. Among the operating or finance leases, nine MR tankers out of the Tanker to the SPVs, according Yuan15.8bn total liabilities,

www.lloydslist.com Lloyd’s List 5 it had been late on Yuan1.2bn payments as of end-April 2014, including principal, interests and finance lease hires. So while the company is striving to meet the bumper off- balance-sheet obligation, it has effectively been defaulted too, based on the events of default stipulation in Companies Registry mortgage documents. In addition to bank borrowings, Nanjing Tanker has nine vessels on long-term sale and leaseback with three bank- affiliated leasing companies. CMB Financial Leasing, a subsidiary of China Merchants Bank, Minsheng Financial Leasing and CDB Leasing between them have one aframax, two panamax crude tankers, two MR product tankers and four chemical tankers bought from and leased out to Nanjing Tanker for eight to 10 years between 2009 and 2012.

Auditor’s alarm

Nanjing Tanker never made an adequate disclosure of the expensive charters or the obligation it is bound to honour under the loan agreements. Nanjing Tanker is China’s first state-owned enterprise to lose its stock market listing.© 2014 AP/Xinhua/Wei Ming Despite the company’s announcement at end-2013 that it would bring the 20 vessels Yuan6.4bn is due in a year. to have Nanjing Tanker in “The popular mindset among back to the balance sheet, Branches of Industrial and their portfolio, some of them China’s financial institutions its latest financial reports as Commercial Bank of China, blindfolded by an obsession is it can do no wrong to lend of end March showed such a Bank of China and China with state-owned enterprises, to state-owned enterprises, change was yet to be reflected. Construction Bank are listed as which are regarded as unlikely especially a company like According to a previously the top five creditors by the size candidates for bankruptcy. Nanjing Tanker that has cited source, Nanjing Tanker of outstanding arrears. As a result, due diligence business of national, strategic was requested by its auditors Lloyd’s List Intelligence processes sometimes may be importance. Companies of to bring the 20 vessels under data show the 10 MRs and 10 nothing more than a formality. this kind automatically enjoy spotlight. The company’s VLCCs were delivered between Two of the company’s high internal credit ratings. auditor, ShineWing Certified April 2007 and April 2012, domestic creditors, both of Deals are often closed with Public Accountants, has implying that the loans remain whom requested anonymity, repayment guarantees from the repeatedly questioned Nanjing outstanding for between three confirmed to Lloyd’s List that parent group, sometimes with Tanker’s accounting treatment to eight years. they were not aware of the collateral.” on the 20 charters. All of the three banks have scope of Nanjing Tanker’s off- Both sources said Nanjing Since 2007, the year that exposure in the off-balance- balance-sheet obligations. Tanker had taken a hard line Nanjing Tanker rejigged its sheet charters, too, as shown “When we decided to do against domestic creditors. fleet and inherited the time in Companies Registry records. business with Nanjing Tanker, “The company is adamant charters from its parent However, the hidden off- due diligence was indeed to us it would never default company, the size of its balance-sheet debt is not only not thorough enough. Their on foreign banks. In the prepayment account, mostly a blind spot for the public, off-balance-sheet exposure meantime, they attempt to advance rentals to the SPVs, but also for some of its other and borrowings in foreign shed or evade some debts has been ballooning. creditors. currencies were never raised as owned to domestic creditors,” The company reported Banks and leasing a point for examination,” said said one source. Yuan921m in prepayments companies were also eager one of the creditors. Nanjing Tankerannounced at the end of 2007, which

*FOOTNOTE: International Financial Reporting Standards categorise audit opinions into unmodified and modified. When financial statements of the company under audit reflect a “true and fair view”, the auditor issues an unmodified opinion. If the financial statements fail to provide a true and fair view, the auditor report modified opinion that can fall into one of three categories: qualified opinion, adverse opinion and a disclaimer.

6 Lloyd’s List www.lloydslist.com accounted for 9% of its total ShineWing issued a qualified of Nanjing Tanker’s annual Companies Registry records assets and 28% of its current opinion over Nanjing Tanker’s reports, with information and Nanjing Tanker’s assets. By the end of 2012, the Yuan2.1bn provisional charges on vessel names, charter supplemental announcement same account increased to on the 10 VLCC time charters, periods, commencement date in February, the carrier signed Yuan3bn, constituting 15% of citing its inability to gather of charters, and contracting four timecharter contracts its total assets and 57% of its adequate audit evidence parties, which are the SPVs. on 3 September 2008 for four current assets, an analysis of to assess the impact of the The company did not VLCCs — Yangtze Splendor and its financial reports show. provisions on the company’s disclose the charter rates of Yangtze Bravery at $38,000 per The leasing deals also balance sheet. the 10 VLCCs until February day, and Yangtze Rainbow and consume a sizeable amount The auditor’s predicament as a supplement to its earlier Yangtze Diamond at $49,500 of cash, taking up an average has continued into this year. announcement to book the per day. The charterparties of 24.5% of the company’s Interviewed in Beijing last Yuan2.1bn impairment charges. cover 10 years from the day the annual operating cash outflow week, Sinotrans & CSC Group However, the Shanghai Stock vessel is delivered. between 2007 and 2013. Its spokesman Xu Jiandong said: Exchange stipulates companies A rough calculation suggests operating cash flow was “The auditors said in the group are obliged to disclose “major the four vessels could cost never in the black during president’s office today that transactions” that could have a Nanjing Tanker $638m the six years, and averaged they are again going to issue a material impact on companies’ (Yuan4.364m), 2.1 times the Yuan145.7m. qualified opinion regarding the operation or earnings, and revenue it made in 2007, In the 2012 annual report, prepayment account held by the bourse has a standard qualifying as a material ShineWing issued a qualified Nanjing Tanker’s Singaporean template covering a wide array transaction defined by the opinion over the prepayment subsidiary, saying that they of information to guide how a listing rules. account of CSCOT, the were again unable to gather disclosure shall be made. “Nanjing Tanker’s disclosure Singapore-registered enough auditing evidence to There are five quantitative on these time charters is not subsidiary that co-time issue an unqualified opinion.” criteria that define what adequate. The company’s charters the 20 vessels.* constitutes a material business is concentrated ShineWing said it could Listing compliance transaction, benchmarked on tankers. The chartered- not complete the external to a company’s total assets in tonnage comprises a confirmation process for Nanjing Tanker never made size, revenue, or earnings in significant proportion in CSCOT’s Yuan3bn prepayments a thorough announcement the latest financial year. For its main business and has made to the “foreign regarding the 20 off-balance- example, if the value of a material impact on its revenue shipowners” — Nanjing sheet transactions and the transaction exceeds 50% of and earnings,” said a Beijing- Tanker’s euphemism for the scale of its commitments. the company’s revenue stated based industry source familiar SPVs — therefore, it failed to Such debt obligation is almost in the last annual report and with listing compliance for obtain sufficient appropriate certainly a major contributing is over Yuan500m in absolute Chinese shipping companies. audit evidence on which an factor to the delisting. value, such transaction is Nanjing Tanker also omitted unqualified opinion is based. Over the years, the 20 off- deemed as material and should the fact that it is one of the Similar modification recurred balance-sheet time charters be disclosed co-time charterers in the in the 2013 annual report. only appear in the footnotes According to both the arrangement made with the

COMMENT A fetish for state enterprises

AS A state carrier, the growth of Nanjing tonnage, debates and campaigns in the In 2006, Unipec, now the world’s top Tanker epitomises China’s ascendance as political and industrial domain for closer VLCC charterer, signed long-term COAs the world’s largest energy consumer and pacts between national shipowners and with Nanjing Tanker, Cosco Dalian crude importer over the past ten years. national cargo owners have increased and CSD. In the same year, CMES, the According to China Customs, between perceivable in recent years. China shipping arm of conglomerate China 2006 and 2013, the country’s total crude Shipowners’ Association, for example, Merchants Group, floated its shares in imports jumped from 145.2m to 281.9 m has repeatedly demanded national cargo Shanghai with Sinopec its second-largest tonnes, or from 2.8m to 5.4m barrels per owners to refrain from building up their shareholder. day. More than 90% of the imports are own fleets and outsource shipping to the In the 10-year bumper contract that through seaborne transport. China’s daily state carriers. Nanjing Tanker secured from Unipec, the tonnage demand rose from 1.3 VLCCs in In 2006, at the start of China’s 11th two parties agreed to increase cargo and 2006 to 2.4 VLCCs in 2013. five-year plan, Chinese-owned tonnage shipping volumes pro rata. During the same period, Nanjing carried only 10%-20% of the country’s Between 2006 and 2008, Unipec Tanker’s deepsea fleet leapt tenfold from total crude imports, according to Nanjing would dedicate 2.5m-3.5m tonnes of oil 740,000 dwt to 8m dwt. Tanker’s public filings. per annum to Nanjing Tanker’s vessels, “Nanjing Tanker is indeed a special Due to informal policy initiatives with an extra of 1m-2m tonnes should case. It is entrusted with the national and government hand-outs, the ratio Nanjing Tanker add a new VLCC to its strategic initiative to build up China’s improved to 47% in 2013 but, as Lloyd’s fleet. owned VLCC fleet and increase the share List reported in February, still lags behind The scale will increase to 7m-8m tonnes of Chinese tonnage in crude imports,” the target of 80% set in the 12th five-year in 2009, 11m-13m tonnes in 2010, and said one ship finance source. plan, which ends in 2015. eventually to 18m tonnes per year from Although China, a member of the World From the 11th five-year plan, tie-ups 2010 onwards, according to Nanjing Trade Organisation, does not promulgate between energy majors and national Tanker’s exchange statement. a cargo reservation policy for national shipping companies gained momentum. Continued on Page 8

www.lloydslist.com Lloyd’s List 7 Continued from Page 7 means, hardly traceable on their financial share Unipec as their largest customer reports, the source added. — indicates Nanjing Tanker has been However, freight rates in the COAs recording extraordinarily high operating are index-linked, according to Nanjing Peer-to-Peer review expenses. Tanker’s statement, which meant it The status of Nanjing Tanker as an SOE The Baltic VLCC TCE was hovering well was still exposed to freight market operating in a strategic industry made it below vessel operating costs from the fluctuations. popular in the capital markets. It was a second half of 2010 to the first half of 2013, component of the Shanghai Composite spending eight quarters deep in the red. Compensation schemes Index since its listing in 1997 and was Despite headwinds that brought down The COAs have a compensation scheme only screened out when the delisting was long-term players such as Frontline, Torm shared by shippers and carriers, confirmed this year. and Overseas Shipping Group, CSD and according to SWS Research analyst Amos In early 2011, the company managed to CMES, both operating in tanker and dry Zhang. complete a Yuan2.5bn private placement bulk, have largely withstood the tempest. “The industry norm is to benchmark to fund several VLCC newbuildings, Both companies reported their first annual contract rate to World Scale index with a despite its unimpressive financials and losses last year and quickly rebounded to two-way subsidy scheme. For example, higher-than-average price-to-earnings profit in the first quarter of this year. spot rates will be exercised when between ratio and the market’s overall lukewarm In the tanker segment, CSD reported WS65 and WS135. When spot rates drop sentiment for shipping stocks, according negative 3.9% and negative 2% operating to below WS65, oil majors subsidise 60% to Caixin Media. profit margins in 2012 and 2013, and of the discrepancies to shipowners, who Nanjing Tanker did not divulge CMES recorded negative 4.8% operating absorb the remaining 40%; when spot chartering costs when reporting profit margins in 2013. Other years were rates rise to above WS135, shipowners operating expenses and the interest on positive. rebate half of the extra gain to cargo the off-balance-sheet loans on the 20 In contrast, Nanjing Tanker started owners and retain the other half,” said Mr tankers remains unknown. Lloyd’s List is posting operating deficits for its oil tanker Zhang. therefore unable to quantify the impact fleet since 2011, with loss margins at 6.1% In 2014, the corresponding TCE rate those charters have on Nanjing Tanker’s in 2011, 11.5% in 2012 and 10.7% in 2013. of WS65 is $50,000-$51,000 per day on earnings over the years. The company also continued to sail in the Baltic Exchange TD3 Middle East Gulf- However, a peer-to-peer comparison red in the first quarter, with Yuan255.7m Japan route, and $155,000-$158,000 per with China Merchants Energy Shipping net losses, in spite of a budding recovery day for WS135. and China Shipping Development that lifted many other tanker companies Entering in the 12th five-year plan, — which along with Nanjing Tanker out of red during the same time. national shipping companies and shipyards established a rapport. It is rare for state carriers to place orders at non- state shipyards, be they Chinese private LISTED CHINA TANKER COMPANIES PROFIT MARGIN or foreign yards, except for tonnage Nanjing tanker China shipping development China merchants energy shipping beyond the technical reaches of Chinese 50% state shipbuilders. According to a source close to state- 40% owned shipping companies, state carriers can claim cash rebates from 30% the government when ordering tankers at state yards. As a result, it is also uncommon to see national carriers source 20% alternative financing for newbuildings, especially tankers, such as that which 10% Nanjing Tanker opted for. However, Nanjing Tanker’s 20 time 0% charters were arranged during the 11th 2007 2008 2009 2010 2011 2012 2013 five-year plan, before these funds were -10% earmarked. The subsidies are realised at a group -20% level and later funnelled to the affiliated listed companies’ through indirect Source: Company disclosure, compiled by Lloyd's List

SPVs, saying all 20 vessels and Betelgeuse Shipping, the Under the listing rules, such out the company. Since late are chartered by its Singapore registered owners of the 29,700 a link constitutes a connected March, minority shareholders, subsidiary CSCOT. dwt Yangtze Rhyme and Yangtze transaction and necessitates a some of who lost life time Separately, Nanjing Tanker Fountain. separate announcement. savings to the stock, have also failed to disclose Mr Liu, now chairman of repeatedly gathered and what qualifies a connected Nanjing Tanker Supervisory Decline and fallout protested at the office transaction. Committee, was the company’s buildings of China Securities According to the CR records, deputy general manager and Nanjing Tanker’s delisting Regulatory Commission, Liu Yibin, a senior executive chief accountant in 2007, has sparked a public outcry Shanghai Stock Exchange and of the company and its parent when the company signed the in China and disillusioned Nanjing Tanker’s headquarter, CSC Group, is one of the three contracts with Aldebaran and small shareholders who once according to domestic media directors at Aldebaran Shipping Betelgeuse. hoped Beijing would bail reports.

8 Lloyd’s List www.lloydslist.com Some of them have entrusted SINOTRANS & CSC GROUP STRUCTURE lawyers to gather evidence of the company’s wrongdoings such as false or misleading Sinotrans Group STATE-OWNED ASSETS SUPERVISION AND statements to investors. But so CSC Group ADMINISTRATION far no case has been accepted COMMISSION OF THE STATE COUNCIL by courts. Nanjing Tanker’s ultimate 100% parent, Sinotrans & CSC Group, also appears to have 100% 100% lost track on the company’s SINOTRANS AND CSC GROUP concealed debt. “Personally I’m not aware there are foreign banks lending to Nanjing Tanker,” Mr Xu told Lloyd’s List in Beijing last SINOTRANS GROUP week. CSC GROUP “At the group level, we’ve 68% 58% 55% 27% taken into account possible off-balance-sheet obligations held by Nanjing Tanker. The company is undergoing SINOTRANS SHIPPING SINOTRANS LIMITED NANJING TANKER CSC PHOENIX a transitional period. In (00368.HK) (00598.HK) (600087.SH) (00520.SZ) principle we will take a market approach in any decisions to 63% be made. We need to insulate the group from the contagion of [Nanjing Tanker’s] crisis,” SINOTRANS AIR said Mr Xu. TRANSPORTATION Choreographed by the State DEVELOPMENT CO Council, Sinotrans and CSC (600270.SH) Source: Company disclosure merged in January 2009 to create the third-largest maritime and logisitics conglomerate in China, however, the marriage has so far produced unbalanced results. Sinotrans subsidiaries, such the entire group after five years’ entered court-administered “drew benefits” from the as Hong Kong-listed Sinotrans infighting, there will be more restructuring in November. restructuring of the dry bulk Shipping and Sinotrans Limited, hidden bombs detonated in the A debt reduction plan was company and that is now have performed much better CSC companies , which were reached in February. After seeking similar way out for than those companies from the sowed during market height.” debt-to-equity swap and Nanjing Tanker. CSC side. capitalisation of common “It seems to them that it An executive at Sinotrans Yet another haircut? reserves, ordinary creditors is viable to have financial & CSC told Lloyd’s List that will see only 11.6% arrears institutions pay for the the CSC Group companies, The collapse of Nanjing Tanker paid up, compared to 1.9% mistakes they made,” one of such as Nanjing Tanker and amounts to a double whammy repayment rate under a the sources said. CSC Phoenix, ordered or for some of the largest financial liquidation scenario, according chartered many ships during institutions in China, some to stock exchange filings of the height of the shipping cycle already taking haircuts in the Shenzhen-listed CSC Phoenix, and before the merger. “The ongoing restructuring of CSC once China’s biggest dry bulk integrated group management Phoenix, Nanjing Tanker’s cabotage operator. Additional reporting is in the dark,” he said. sister company. The sources, both of whom by Caixin Media reporter “As the Sinotrans side of Under pressure from had exposure in CSC Phoenix Wu Jing management took control of creditors, CSC Phoenix fallout, said the parent group

lloydslist.com | No 61,052 | Wednesday November 13, 2013 Leading maritime commerce since 1734 Reporter, Asia Jing Yang Shipping Movements +44 (0)20 7017 5280 Lloyd’s is the registered trademark of the society No part of this publication may be reproduced, stored incorporated by the Lloyd’s Act 1871 by the name of Lloyd’s in a retrieval system, or transmitted in any form or Editor Richard Meade Casualties +44 (0)20 7017 5205 by any means electronic, mechanical, photographic, Editoral and commercial inquiries recorded or otherwise without the written permission Digital Content Manager Nicola Good Subscriptions +44 (0)20 3377 3792 Lloyd’s List, Christchurch Court, 10-15 Newgate Street, of the publisher of Lloyd’s List. Lloyd’s List is available London EC1A 7AZ online by placing a subscription for a regular daily Editor-in-Chief, Asia Tom Leander Tel: +44 (0)20 7017 5000 supply with the publishers in London, Informa UK Ltd. Fax: +44 (0)20 7017 4782 Senior Reporter, Asia Max Tingyao Lin Email: [email protected] Published by Informa UK Ltd. Projects Editor James Baker © Informa UK Ltd 2014

Graphics Julian McGrath

Design Heather Swift

www.lloydslist.com Lloyd’s List 9 THE HISTORY OF NANJING TANKER

Nanjing Tanker’s long voyage to delisting

June 4 2014

The last trading day of Nanjing Tanker in the Shanghai Stock Exchange

April 11 2014

Shanghai Stock Exchange decided that Nanjing Tanker was to be delisted a er a 30-trading day settlement period from 21 April

March 20 2014

Nanjing Tanker reported Yuan 5.9bn net losses for the year 2013

April 18 2013

Nanjing Tanker reported Yuan 1.26bn net losses for the year 2012.The stock was put under a listing suspension for three consecutive annual losses

February 22 2013

Nanjing Tanker announced to book Yuan 2.1bn impairment charges over the 10 VLCC time charter contracts

May 16 2012

Yangtze Diamond was delivered by Shanghai Jiangnan Changxing Shipyard carrying a daily time charter rate of $49,500 for 10 years

April 10 2012

Nanjing Tanker reported Yuan 789m net losses for the year 2011. The company restated its nancial statements for the year 2010, which reversed Yuan 8.8m prots to Yuan 18.6m losses. Subsequently the stock was put under a delisting watch for two consecutive annual losses

January 11 2012

Yangtze Rainbow was delivered by Shanghai Jiangnan Changxing Shipyard carrying a daily time charter rate of $49,500 for 10 years

November 17 2011

Yangtze Splendor was delivered by Dalian Shipbuilding Industry Co, carrying a daily time charter rate of $38,000 for 10 years

September 16 2011

Yangtze Crown was delivered by Shanghai Waigaoqiao Shipbuilidng Co, carrying a daily time charter rate of $38,000 for 10 years

June 10 2011

Yangtze Star was delivered by Shanghai Waigaoqiao Shipbuilidng, carrying a daily time charter rate of $49,500 for 10 years

March 2 2011

Nanjing Tanker reported Yuan 8.8m net prot for the year 2010

February 9 2010

Nanjing Tanker Corporation reported Yuan 4.2m net prot for the year 2009

January 12 2010

Yangtze Fountain was delivered by Jiangnan Shipyard, carrying a daily time charter rate of $38,000 for 12 years

May 26 2009

Yangtze Rhyme was delivered by Jiangnan Shipyard, carrying a daily time charter rate of $38,000 for 12 years

March 2 2009

Nanjing Tanker reported Yuan 596m in 2008 net prot

January 6 2009

Yangtze Spring was delivered by Shanghai Jiangnan Shipyard, carrying a daily time charter rate of $38,000 for 12 years

January 2009

Sinotrans Group China Changjiang National Shipping Group merged to create Sinotrans & CSC Group

October 10 2008

Yangtze Pearl was delivered by Shanghai Jiangnan Changxing Shipyard, carrying a daily time charter rate of $38,000 for 12 years

September 15 2008

Lehman Brothers led for chapter 11 bankruptcy protection, marking the onset of the global nancial crisis and the worst shipping industry depression in decades

September 3 2008

Nanjing Tanker signed loan agreement, time charter contract and Shipmanagement contract for four VLCCs, Yangtze Splendor, Yangtze Bravery, Yangtze Rainbow and Yangtze Diamond

March 5 2008

Nanjing Tanker reported Yuan 369.8m in 2007 net prot

December 21 2007

Nanjing Tanker signed loan agreement, time charter contract and shipmanagement contract for two VLCCs, Yangtze Star and Yangtze Crown

December 17 2007

June 11 2007

Nanjing Tanker signed loan agreement, time charter contract and shipmanagement contract for two VLCC, Yangtze Rhyme and Yangtze Fountain

May 16 2007

April 30 2006

Nanjing Water Transport Industry Co. signed a 10-year contract of areightment with Sinopec to carry crude imports into China

June 12 1997

Nanjing Water Transport Industry Co. floated its shares in Shanghai Stock Exchange

1993

Source: Lloyd’s List; public information lloydslist.com | Thursday May 29, 2014 Leading maritime commerce since 1734

Nanjing Tanker responds to ‘hidden loans’ inquiry

Debt-ridden Chinese giant continues to dodge key issues after stock exchange demands answers

NANJING Tanker Corp, the debt-ridden Chinese state carrier, has denied any wrongdoing in the way it has accounted for 20 off-balance- sheet leases, after a Lloyd’s List investigation triggered an inquiry by Chinese regulators, writes Jing Yang. The Shanghai Stock Exchange, where Nanjing Tanker is listed until Wednesday, formally requested clarification from the company regarding 20 charter deals after Lloyd’s Nanjing Tanker argued that its previous filings fulfilled its obligations of adequate disclosure. List revealed on Monday that Nanjing Tanker had built up disclosure. However, as course of 15 years, all outside Mr Liu, now the chairman of a shadowy book worth at Lloyd’s List reported, all of its existing balance sheet, as Nanjing Tanker supervisory least $3.5bn (Yuan2.18bn) in the company’s past filings Lloyd’s List revealed. committee, was the both assets and liabilities, omitted key details of the 20 company’s chief accountant overwhelming the size of its time charter transactions, Senior executive between 2006 and 2008, when existing balance sheet. which are in truth loan Nanjing Tanker also the leasing contracts were agreements to finance 10 responded to questions signed. Previous filings very large crude carriers regarding its failure to Under the listing rules, In response to the bourse and 10 medium range tankers. disclose a connected such a link constitutes a today, Nanjing Tanker said in The 20 charters, all transaction. connected transaction and a filing that it had not hidden contracted at fixed rates The Lloyd’s List necessitates a separate any information that should prior to the 2008 financial investigation revealed that announcement. have been disclosed under crisis, are one of the major Liu Yibin, a senior executive In a six-page statement, listing rules. reasons that the company is of the company and its parent Nanjing Tanker said: “When In the statement, Nanjing now reeling over insolvency. CSC Group, was one of the serving as director of the Tanker, the first state- Nanjing Tanker in three directors at Aldebaran shipowning companies, Mr owned company to lose effect borrowed $1.3bn in Shipping and Betelgeuse Liu Yibin, as a representative a listing status in China’s principal to finance the 20 Shipping, the registered of the time charterer, ensured stock market, argued that newbuildings and actual owners of the 29,700 dwt the exercise of the time its previous filings fulfilled repayment could amount Yangtze Rhyme and Yangtze charter contracts, prevented its obligations of adequate to $3.5bn (Yuan21.8) in the Fountain. Continued on Page 2

www.lloydslist.com Lloyd’s List 1 Continued from page 1 the chartered vessels from the charter deals, which being sold or chartered to involve non-cancellable and other parties, and protected non-negotiable charter hire the charterer’s interest. He payments. did not perform duties as These payments are in fact a director on a daily basis, repayments of principal he never attended board and interest, as Lloyd’s List meetings of the shipowning revealed. companies, or participated in The company also fails to operational matters. Neither address the offshore set-ups did he take any remuneration that ultimately hold the 20 from the shipowning Read the full report on the hidden loans that sank Nanjing Tanker vessels and the fact that the companies.” at http://www.lloydslist.com/ll/incoming/article442023.ece company is also a co-time Mr Liu resigned from charterer of the vessels, Aldebaran and Betelgeuse with a connected party, to Nanjing Tanker for 12 together with its Singapore- in April last year, Nanjing the transactions should be years at $38,000 per day. registered subsidiary. Tanker added. “The company disclosed immediately, if The two contracts combined As Lloyd’s List reported, the has no shareholdings in the the value of the transaction are valued at $332.88m vessels are ultimately held two shipowning companies.” exceeds 5% of the company’s (Yuan2bn), surpassing by an orphan trust registered The clarification from last audited net asset value Nanjing Tanker’s net asset in the British Virgin Islands, Nanjing does not, however, and exceeds Yuan30m in value at the end of 2006, which holds the legal title address the requirement absolute value. which was Yuan1.5bn. of the ships while passing under Shanghai Stock As Lloyd’s List reported, Moreover, in the latest filing all obligations and risks Exchange rules that when Yangtze Rhyme and Yangtze Nanjing Tanker continues to to Nanjing Tanker, on the companies have transactionsShipping, Fountain were time-chartered avoid crucialcovered issues involving surface, the time charterer.

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