China Construction Bank (CCB) has won a court order forcing southern Chinese power company Lanyue Energy Development Co and its shipping arm, Lanhai Shipping, to hand over two panamaxes and five supramaxes for auction. The seven ships currently set
for auction are between three and four years old. All are under the Chinese flag but are qualified for international trading.
Ships are heavily overvalued in the court ordered process and the initial 18 September auction by the Guangzhou Maritime Court is certain to fail.
Under Chinese maritime legal practice, that will lead to a second auction 15 days later with a 20% reduction in the minimum pricing for the sale.
China Construction Bank (CCB) is looking for a total of just over CNY 1bn ($163.5m) on theseven ships, based on a defaulted CNY 737m mortgage dating to 2010.
Shipping operation has already
outlived its parent. Lanyue, as the
group’s main coal trading arm, basically ceased operating as far back as the last quarter of 2012, because of a cash-flow breakdown after banks stopped supplying credit at the end of the coal boom. Chinese censors reportedly ordered local journalists not to report on Lanyue’s business. “Do not report or comment on issues concerning Guangdong Lanyue Energy Ltd,” ordered the Guangdong Propaganda Bureau
on 24 January 2013,
Lanhai fleet has continued trading but not necessarily paying its banks.
China Construction Bank (CCB) as financier of eight ships in all, market sources point to five more ships financed by Bank of China, five by Minsheng Financial Leasing and one by a local commercial bank. Lanhai and its parent have left a trail of unhappy shipyards
across Chinese shipbuilding.
The cancellations include four Rongsheng panamaxes that Minsheng Financial Leasing had to place
with other owners, two Yangfang panamaxes cancelled by mutual
agreement, three domestic-trading,
Chinese—flag, 51,000-dwt handy-
maxes at Xiamen Shipyard, two of
the same size at Sanfu Shipyard and
four more 79,600-dwt panamaxes
from Nanjing Wujiazui.
When Lanyue began its speculative venture into shipowning, it had not yet built up a very strong technical or supervisory shipping team and brokers are therefore urging clients to inspect diligently.
The seven ships to be auctioned
include two panamaxes from
Nanjing Wuiiazui Shipbuilding,
the 79,300—dwt Lun Hui Xu Ri and
79,400-dwt Lun Hui Yung Guung
(both built 2011), which are on
sale subject to a minimum price
of CNY 162.3m ($26.43m). Brokers
say the market for such tonnage
is around $20m to $21m and they
expect a distressed-sale discount
to yield a price level substantially
below that.
The five supramaxes in the sale,
all from Yanfang Xiamen, are the
57,100—dwt Lun Hui Yung Fun and
57,200-dwt Lun Hui Dong Feng (both
built 2010), the 56,700—dwt Lun Hui
Ying Xin and Lun Hui Liun He and
the 56,800-dwt Lun Hui Qiun Jin (all
three built 2011). Two of the five
lack gears and grabs,which should
have a pricing consequence of
about $1m per ship.