"Project and partner: TTS Marine ASA is a producer of cranes to offshore vessels. The funds from Norfund were used to finance the establishment of TTS Marine’s 2nd facility in China.
Investment Structure: NOK 10 mill as a senior loan. Established June 2005, 6 year term and a floating interest rate priced as 6 Month Nibor + a spread of 175 basis points (1.75%). The loan is given to the parent company on a group level and is ranking pari pasu with corporate loans from the bank. In addition Norfund has a share pledge in all of the shares of TTS Marine’s 100% owned subsidiary TTS Marine Shanghai Ltd in Cina.
Norfund’s Strategy: The investment was part of a Norfund attempt to attract and support an expansion of a Norwegian enterprise with international experience, representing a lower risk profile with a yield component attached to the investment structure, generating a relatively stable interest income. The deal was the first “pure” loan structured direct investment with a reputed and higher profiled partner, representing a shift in risk profile from previous direct investment deals in Norfund to balance the portfolio risk. In addition there were no requirements from Norfund to influence the company or take an active position in the follow up.
Developmental Impact: -Sharing risk with and supporting the international expansion of a successful Norwegian enterprise -Transfer of knowledge and competence of assembling high quality cranes -Generation of employment and taxes locally in China
Project’s strengths: -Technical and financial strong project sponsor -Low risk profile: exposure to Norwegian parent company and not local project/subsidiary -Additional securitization in pledged shares -Interest income paid every quarter -The loan is tiny compared to group bank facilities of NOK 500 mill but still TTS Marina ASA wanted Norfund as partners, as we offered a risk sharing for its Chinese expansion.
Key risks and issues to discuss: -Loan collateral according to agreement was not in place prior to disbursement of the loan. Final registration with Chinese authorities in final stages but still ongoing. -How to take advantage of having a high profiled partner? -TTS Marine has yielded an impressive return to its shareholders last 2 years but without Norfund getting any of this upside, despite sharing some of the highest risks in the company’s operations."
- Scalable enterprises
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