Strategic Management Report |
First Ship Lease Trust (“FSL Trust”) - Singapore |
Charl Maingard – CT0209461 |
Company Profile 2
The General Environment of FSL Trust 2
Industry Competitiveness – Where does FSL Trust stand? 4
Summary of Industry Competitiveness for FSL Trust 5
Internal Environment Analysis 5
SWOT Analysis 6
First Ship Lease Trust ("FSL Trust") is a Singapore business trust that provides lease financing solutions to the international maritime industry. FSL Trust currently owns a diversified portfolio of 25 vessels with an average age of eight years. FSL Trust derives stable ...view middle of the document...
international trade development,
d. changes in marine transport methods and the development of alternative solutions,
e. the globalization of production and
f. environmental and other legislative trends.
FSL Trust owns a number of vessels which can serve a wide variety of industries. Since FSL Trust is not a shipping company, the business is of such a nature that it rather offers alternative financing solutions to the shipping industry, thereby reducing the cost of ownership to a lessee, and yet giving the lessee total control over the running of the ship. Since the company’s profitability would rely heavily on both long and short term lease agreements, it is well placed in this area whereby currently 16 of their vessels are under such contracts.
Even though long term lease agreements are based on water-tight contracts and therefore show as future earnings (sometimes up to 10 years plus extensions), the recent defaults on payments by two of their customers has had a massive negative affect on the company.
FSL Trust is currently on very shaky grounds. The entire top management team including the president and CEO resigned on-masse during July of 2013 which left the company without a top-management team for approximately two months. The appointment of Alan Hatton as CEO is a concerted effort to stabilize and turn the company around. The Board of FSL Trust stated that Mr. Hatton brings “significant commercial shipping experience including negotiating and executing time charters, sale & purchase deals and risk management strategies.” In addition, the appointment of Timothy Reid as non-executive director from the insolvency and restructuring firm, Ferrier Hodgson is a significant sign that the company is heading in one of two ways.
The resignation of top-management could have directly been influenced by the ongoing default on lease agreements, as well as the company’s inability to fulfill certain financial covenants.
The ongoing discussions of FSL Trust with lenders to extend the loan covenant relaxation has led the company to halt all share trading on the SGX since November 2013. The current board is investigating the terms of the extension of the covenant and has taken independent legal advice on the matter. Since the company owns a relatively young fleet, and 7 vessels are not on long-term leases, there is probably no reason to purchase any new vessels in the foreseeable future, unless there is a significant uptake in the market. The company will probably focus rather on settling outstanding debt. Owning a relatively young fleet also suggests that the current technologies within the vessels are up to recent standards and would not need any significant upgrades. Advanced technological instrumentation will also not have a major influence on whether a customer will lease one ship over another.
There are numerous examples of the...