Mitsui O.S.K. Lines (MOL) announced on Friday it is taking a hybrid loan equal to $987m, primarily to fund its growth and investment in liquefied natural gas (LNG) vessels and offshore businesses.
The Japanese shipping giant is restructuring its dry bulk and containership divisions in light of market downturns, which led MOL to cut its profit forecast for this year from $197.4m to $148m.
The loan matures in October 2076 but the principal can be paid back sooner after five years from the loan execution date.
A hybrid loan is a combination of a fixed rate loan and an adjustable rate one. The fixed rate applies for a predetermined number of years before becoming adjustable for the remainder.
Its appeal to MOL lies in allowing the firm to strengthen its financial position while avoiding equity dilution, which happens when funds are raised through a new stock issue, for example, and existing stockholders’ stakes become proportionally smaller, whatever the real value of each share.
In a release the company said: “MOL decided to pursue fund procurement through the Hybrid Loan that allows it to balance growth strategies on one hand and financial health on the other.”
