www.msfl.com.cn

Insights into a Pioneering JOLCO Transaction

--From Lessee’s Perspective M i n s h e n g F i n a n c i a l L e a s i n g C o . , L t d .

CASE STUDY –

CONTENTS

Minsheng Financial Leasing. Co., Ltd. 1

Shipping Leasing Division 2

The Pioneering JOLCO Structure 3

How To Choose a Right Deal for JOLCO 4

Key Points For A Successful JOLCO 5

Established on April of 2008

Shipping Aviation

Equipments Vehicle

CBIRC -- Bank regulatory policy requires that parent Bank provides

liquidity support to its leasing subsidiary unconditionally, which is

specified in AoA.

At the end of 2017, registered capital is over 5 billion RMB, total

assets reached US$27.84Bn, net income exceeded US$368Mn.

Ranks one of the top 5 players in the industry in terms of Asset

scales and leading the profitability among its peers.

Majority owned by the China Minsheng Banking Corp.Ltd --

Ranks the largest non-state-owned commercial bank in China.

Was established in Jan 1996 and listed on both Shanghai and

HongKong Stock Exchange

One of the first five financial leasing enterprises with banking

background in China

1.Minsheng Financial Leasing. Co., Ltd.

One of the largest ship leasing

firms in China

Diversified Portfolio of 5.6 billion USD at

the end of 2017 “ 2.Shipping Leasing Division

0.3 0.7 1.0

1.7

2.4 3.0

4.0 4.1

5.6 5.6

0

1

2

3

4

5

6

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Assets of Shipping Leasing Divison Billion USD

2.Shipping Leasing Division

Deal of Year 2014/2018

awarded by Marine Money

First direct rent project of

part of the property

China’s first fishing

vessel leasing project

China’s first sharing-

leasing project

China’s first international

jack-up rig leasing project

FL: 64%

OL: 36%

Domestic

26% Overseas

74%

Bulk

Carrier 30% Container

ship 32%

Offshore

12%

Tanker

19%

Others

7%

End of 2017

2. Shipping Leasing Division

Bulker Containership Tanker Special

Tonnage

Assets(billion USD) 1.64 1.78 1.05 1.06

(%) 29.18% 31.67% 18.68% 18.68%

Fleet(Numbers)

(%)

Core Assets

87 41 41 117

30.5% 14.3% 14.3% 40.9%

82K Bulker

76K Bulker

64K Bulker

57K Bulker

36K Bulker

22000TEU

19000TEU

13900TEU

9400TEU

5700TEU

Products Tanker

Chemical & oi

Asp.& Bit.

Jack-UP

PSV

AHTS

Fishing boat

Containers

0.1

1.8%

53,449(TEU)

/

40’HC

20’DC

Track Records

2.Shipping Leasing Division

5*13100TEU Container Ships

500m USD

6* Container Ships

900m USD

14*Container Ships

400m USD

4*64k DWT Bulk Carriers

2 years Time Charter*2

3 years Time Charter*2

11 * Asp.& Bit. Ships

360 m USD 14 * MR

510 m USD

4 * LR2

140 m USD

1* Super M2 JU Drilling Rig

130 m USD

Underwriter’s SPV

(Lessor/

Borrower）

MSFL’s SPV

(Lessee/

Sub-Lessor)

Initial Sub-Lessee

Initial Sub-lease

Manager MSFL

BNPP(Sole

Arranger/Lender/IRS

Provider)

①General

Assignment

&

Mortgage

②Loan ③Repay

P&I

Lessee Parent Support Letter

② Transfer Title

① Purchase

Containers

③Head lease

④Pay Lease

Rent

Initial Lease Pay

Lease Rent

General

Assignment&

Distribute

Lease Rent

Management

Agreement

3. The Pioneering JOLCO Structure

Equity Underwriter

Lessor Parent

Support Letter

Lessee Parent

Support Letter

Lessor Parent

Support Letter

Manufacturer

Container

Purchase

Agreement

The First

Shipping/Container

JOLCO Deal for Chinese

Financial Leasing

Companies

4.How To Choose A Right Deal For JOLCO

Initial Sub-lease: Operating Lease

Initial Sub-lease: Flexible Options

are Not Suitable

Initial Sub-lease: EOD will

Cause Huge Penalty in SLV

Assets 1. Qualified Specs. for JOLCO

2. Controlled by Sub-lessor

Tenor

1. Prefer 5Y to 8Y

2. Only one EBO one PO, No

Voluntary Prepayment

Lessee 1. Big Name

2. Good Credit

Professional institutions

Arranger

Experienced and Efficient JOLCO Arranger

lays the foundation for success

One stop shop

5. Key Points For A Successful JOLCO

A

B

Good structuring ability

Strong placement ability for Equity

and Debt

V.S

SLV/TV is a kind of Black-box

Economics

It’s a fundamental factor should be agreed in

the Beginning

The earlier Termination, the more IRR of

Funding Cost

5. Key Points For A Successful JOLCO

A

B

C

D

More portion of Equity benefits Lessee

Lease Rent in Head-lease should be

lower than the one in Sub-lease

TV should be lower than SLV

Economics will be changed

according to IRS Price

SLV or TV should be compared with FMV

Valuation

Valuation Terms are important

PO and EBO can be fixed on Day 1

5. Key Points For A Successful JOLCO

A

B

Valuation before Delivery –

Determines the Purchase Price

Valuation when Early termination –

Affects SLV or TV

Documentation

Professional legal counsels will support a

smooth closing

Time cost and Legal fees

V.S

100% LTV and Fixed Cost Equity

5. Key Points For A Successful JOLCO

A

B

C

Senior Loan Financing Documents +

Purchase & Lease Documents

FA – Usually on Non-recourse Basis

Clear demarcation of obligations

Flow-through Mechanism – Borrower

and Lessee should be on the same

page during the Loan Tenor

Established financing channels with major shipping

financial banks

Financing Partners

Thank you Minsheng Financial Leasing Co., Ltd

Financial Markets Dept. Nov 2018