Where has all the funding gone?Simon Deefholts Director, Global Shipping, HSBC Bank plc

DATE: May 2010

2

0

20

40

60

80

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

USDbn

0

100

200

300

400

No.

Deal value No. of loans

Global shipping loan volumes

Source: Dealogic

2005-2008 = USD71bn

2000-2008 = USD39bn

Average per annum

3

First quarter global shipping loan volume

0

5,000

10,000

15,000

20,000

25,000

1Q 2005 1Q 2006 1Q 2007 1Q 2008 1Q 2009 1Q 2010

USDm

0

20

40

60

80

100

No. of deals

Volume No. of dealsSource: Dealogic

4

Cumulative bank debt in shipping

Selective 2005, 2008 & 2009 shipping portfolio sizes

29

.5

20

.6

14 1

7.5

12

.6

4.5

8.9

7.9

6.2

58

.0

44

.8

36

.0

30

.0

19

.5

12

.0 14

.6

11

.3

11

.3

49

.3

33

.3

28

.0

23

.0

18

.4

18

.0

13

.1

11

.3

9.5

0

10

20

30

40

50

60

70

HSHNordbank

DeutscheSchiffsbank

DnB NOR RBS Nordea BNPParibas

DVB Danish ShipFinance

DeutscheBank

2005 2008 2009Source: Marine Money, HSBC estimates

USDbn

5

The orderbook during 2009

Post cancellations ?Global Shipping orderbook

Source: HSBC estimates

US$500bn US$350bn ?

Over 3.5 years Over 5 years

Annual capital needed US$100bn US$70bn

Annual debt requirements (assuming LTV 60%)

US$60bn US$40bn

6

Show me the money!

Bank debt 2010Global Shipping Bank debt today

$500bn$500bn $475bn$475bn

+ commitments$75bn

- amortisation ($70bn pa)$100bn

Source: HSBC estimates

7

Closing the funding gap

Cancellation and deferral of orders

Private equity / distressed funds

Vendor financing / ECA backed transactions

Equity Capital Markets

Debt Capital Markets

8

Equity Capital Markets for shipping

Initial public offerings

Rights issues

Private placement of shares

Hybrid instruments (convertible bonds)

9

Shipping, Offshore and Cruise issues 2010: Public offerings

Company Date Status Listing Size

Seadrill (Dual listing) Apr-10 Completed NYSE -

Alma Maritime Mar-10 Pulled NYSE -

Baltic Trading Mar-10 Completed NYSE USD228m

Golden Ocean (Dual listing) Mar-10 Completed Singapore -

Knutsen Offshore Tankers Mar-10 Pulled / Delayed Oslo -

OSX Brasil Mar-10 Completed Sao Paulo USD1.6bn (BRL2.8bn)

Scorpio Tankers Mar-10 Completed NYSE USD163m

Crude Carriers Corp Mar-10 Completed NYSE USD257m

Source: Marine Money, Bloomberg

10

Company Target date Status Listing Target size

Greatship 2010 In progress Bombay -

NOR Offshore Jun-10 In progress Singapore -

Norskan Jul-10 In progress Sao Paulo -

Primelead / Ocean Rig 2010 In progress NYSE -

Seacube Container Leasing (Seacastle) 2010 In progress NYSE USD165m

Sovcomflot 2010/11 In progress LSE -

Wilhelmsen Jun-10 In progress Oslo USD400m

Shipping, Offshore and Cruise issues 2010: Public offerings (cont’d)

Source: Marine Money, Bloomberg

11

Shipping, Offshore and Cruise issues 2010: Private placements

Company Date Status Listing Size

Gaia Maritime Jun-10 On hold Oslo USD100m

Ridgebury Tankers May-10 Completed NYSE USD225m

Diana Apr-10 Completed - USD33m

Saga Tankers Apr-10 Completed Oslo USD120m

Seadrill Ltd Apr-10 Completed Oslo USD322m

Source: Marine Money

12

Shipping, offshore and cruise issues 2009: Rights issues

Issuer: Neptune Orient Lines

Type of offering: Renounceable rights issue

Size: S$1.437bn / USD972m

Pricing Date: 02 June 2009

Rights ratio: 3 rights share for every 4 existing shares

Offer price: S$1.30

Reference price: S$1.53

TERP: S$1.43

Offer price discount: 15% of the closing price

Lead manager & Underwriters: HSBC, J.P. Morgan, Morgan Stanley

Neptune Orient Lines successfully raised a S$1.437bn rights issue despite the challenging market conditions in mid 2009

Guts of the deal

13

Debt Capital Markets for shipping:Horses for courses

Euro bond market

US bond market

Convertible bond market

NOK bond market

Islamic bond market

14

Corporate yields and spreads have tightened

Source: Navigator, Bloomberg

Non Financial BBB Spread and Yield

0

1

2

3

4

5

6

7

8

9

10

Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10

%

0

50

100

150

200

250

300

350

400

450

EUR Non-Financials BBB Yield (LHS) 5yr Euro Swap rate (LHS) EUR Non-Financials BBB Spread (RHS)

bps

15

Shipping, offshore and cruise issues: US high yield

Issuer Issued CurrencyAmount

(m)Type

Coupon (%)

Maturity

OSG Mar-10 USD 300 Snr Unsec 8.125 Mar-18

American Petroleum Tankers

Mar-10 USD 275 Snr Sec 10.25 Mar-15

United Maritime Dec-09 USD 300 Snr Sec 11.875 Apr-15

NCL Nov-09 USD 450 Snr Sec 11.75 Nov-16

Navios Nov-09 USD 400 Snr Sec 8.875 Nov-17

General Maritime Nov-09 USD 300 Snr Unsec 12 Nov-17

Trico Shipping AS Oct-09 USD 400 Snr Sec 11.875 Nov-14

Hercules Offshore Oct-09 USD 300 Snr Sec 10.5 Oct-17

Seacor Holdings Sep-09 USD 250 Snr Unsec 7.375 Oct-19

Hornbeck Offshore Aug-09 USD 250 Snr 8.00 Aug-17

Commercial Barge Line Jul-09 USD 200 Snr Sec 12.50 Jul-17

Royal Caribbean Jun-09 USD 300 High Yield 11.875 Jul-15Source: Marine Money

16

Shipping, offshore and cruise issues: US high yield

Issuer: Overseas Shipholding Group

Issue rating: Ba3/BB-

Size: USD300m

Pricing Date: 30 March 2010

Maturity: 30 March 2018

Spread: MS+205bps (B+236.8bps)

Coupon: 8.125%

Listing: New York

Bookrunners: HSBC, Citi and Morgan Stanley

Overseas Shipholding Group successfully raised USD300m senior unsecured high yield notes in March 2010

Guts of the deal

17

Shipping, offshore and cruise issues: Global debt capital markets

Issuer Issued Currency Amount (m) Type Coupon (%) MaturityDryShips Apr-10 USD 240 Convertible 5.00 Nov-14

Frontline Mar-10 USD 225 Convertible 4.50 Mar-15

Stena Mar-10 EUR 200 Euro high yield 7.88 Mar-20

Pacific Basin Mar-10 USD 230 Convertible 1.75 Mar-16

DryShips Inc Nov-09 USD 400 Convertible 5 Nov-14

Ezra Oct-09 USD 100 Convertible 4 Nov-14

APMoller-Maersk Oct-09 EUR 750 Eurobond 4.875 Oct-14

Euronav Sep-09 USD 150 Convertible 6.5 Jan-15

Seadrill Sep-09 USD 500 Convertible 4.875 Sep-14

Subsea 7 Sep-09 USD 275 Convertible 3.5 Oct-14

MISC Sep-09 MYR 1,000 Islamic MTN 2.57-3.48 1/2/3 yr

MISC Jul-09 MYR 1,000 Islamic MTN 2.80-3.63 1/2/3 yrSource: Marine Money

18

Shipping, offshore and cruise issues: Norwegian bond markets

Issuer Issued Currency Amount (m) Coupon (%) Maturity

J Lauritzen Apr-10 NOK 700 10.50% Apr-15

Aker Drilling Apr-10 NOK 500 NIBOR+4.0% Apr-13

REM Offshore Jan-10 NOK 300 N/A Nov-15

Bonheur ASA Dec-09 NOK 1,000 NIBOR+4.50% Dec-14

APMoller-Maersk Nov-09 NOK 2,000 NIBOR+1.85% Nov-14

APMoller-Maersk Nov-09 NOK 2,000 6.25% Nov-16

Odfjell Nov-09 NOK 500 NIBOR+4.75% Dec-13

Solstad Offshore Nov-09 NOK 700 NIBOR+5.0% Dec-14

Wilhelmsen Oct-09 NOK 600 9.0% Nov-16

Seadrill Oct-09 NOK 800 NIBOR+2.75% Nov-11

Source: Marine Money

19

Shipping, offshore and cruise issues: Eurobond markets

Issuer: A.P.Moller-Maersk A/S

Issue rating: Not rated

Size: EUR750m

Pricing Date: 23 October 2009

Maturity: 30 October 2014

Spread: MS+205bps (B+236.8bps)

Coupon: 4.875%

Listing: Copenhagen & Luxembourg

Bookrunners: HSBC, JP Morgan, Nordea, ING, Danske Bank

AP Moller-Maersk chose the Eurobond market for their EUR750m inaugural issue

Guts of the deal

20

Shipping, offshore and cruise issues: Convertible bonds

Issuer Issued Currency Amount (m) Coupon (%) Maturity

DryShips Inc Apr-10 USD 240 5.00 Nov-14

Pacific Basin Shipping Mar-10 USD 230 1.75 Mar-16

Frontline Mar-10 USD 225 4.50 Mar-15

DryShips Inc Nov-09 USD 400 5.00 Nov-14

Ezra Oct-09 USD 100 4.00 Nov-14

Euronav Sep-09 USD 150 6.50 Jan-15

Seadrill Sep-09 USD 500 4.875 Sep-14

Subsea 7 Sep-09 USD 275 3.50 Oct-14

Source: Marine Money

21

Shipping, offshore and cruise issues: Convertible bonds

Euronav successfully closed a USD150m 6.50% 2015 convertible bond issue in September 2009

Size: USD150m

Status: Senior, unsecured

Maturity: 31-Jan-15 (5.4 years)

Issue/redemption price: 100%

Coupon / YTM: 6.50% semi annual

Conversion premium: 25%

Conversion price: EUR16.28

Call option: After 31-Jan-2013 subject to 130% hurdle

Dividend: Via conversion ratio adjustment for any dividend above dividend threshold

Sole bookrunner: HSBC

Co-manager: ING

Guts of the deal

22

Shipping, offshore and cruise issues: Convertible bonds

Pacific Basin Shipping successfully closed a USD230m 1.75% 2015 convertible bond issue during 1Q 2010

Size: USD230m

Pricing date: 4 March 2010

Maturity: 4 March 2016

Issue/redemption price: 100%

Coupon / YTM: 1.75% semi annual

Conversion premium: 27%

Conversion price: HK$7.98

Call option: After 4 years subject to 130% trigger

Put option: On 4th anniversary at 100%

Bookrunners: HSBC

Guts of the deal

23

Shipping, offshore and cruise issues: Islamic bonds

Issuer Issued Currency Amount (m) Type Coupon (%) Maturity

MISC Sep-09 MYR 1,000 Islamic MTN 2.57-3.48 1/2/3 yr

MISC Jul-09 MYR 1,000 Islamic MTN 2.80-3.63 1/2/3 yr

BLT May-09 IDR 400,000 IDR Bond 14.25-16.25 1/3/5 yr

BLT May-09 IDR 100,000 IDR Islamic Bond 15.50-16.25 3/5 yr

Source: Marine Money

24

Why bother with accessing bond markets?

The cost differential with bank debt markets has narrowed

Potential for longer tenor

Unsecured terms for non-investment grade issuers

Fixed rate available

Fees can refresh bank lending appetite

25

Timing is everything

Issuer: BW Group Limited

Size: USD500m

Issue Ratings: Baa3 (Moody’s) / BBB- (S&P)

Pricing Date: 21st June 2007

Maturity: 28th June 2017

Coupon: 6.625%

Issue Price/Yield: 99.460% / 6.700%

Spread: USD M/S + 95bps / CT10 + 155.75bps

Listing: Singapore Stock Exchange

Bookrunner: HSBC, Morgan Stanley

BW Group’s USD500m inaugural issue in June 2007 was the last shipping bond successfully issued before the market closed down

Guts of the deal

26

Conclusions

Shipping companies have returned to the Equity Capital Markets and the Debt Capital Markets with a volume of issues not seen during the past decade

Wide range of alternatives open to shipping companies, depending on their specific characteristics

Important to team up with an adviser which has a global perspective and enter into early discussion to consider which market is most appropriate for your company

Selecting one of your core lending banks as adviser can potentially increase your bank borrowing capacity (double win)

27

HSBC’s selected shipping transactions

Undisclosed

Advisor to Qatar Navigation and Qatar Shipping on the merger of both companies

Lead Consultant

April 2010

MYR1.0bn

Islamic Medium Term Notes

Joint Lead Manager and Bookrunner

September 2009

USD500.0m

Convertible Bond5 years4.875% semi-annual coupon

Co-Manager

September 2009

€750.0m

Fixed-rate Notes5 years4.875% coupon

Joint Lead Manager

October 2009

USD1.3bn

PEF – Project Finance Debt

Joint MLA

October 2009

USD500.0m

Fixed-rate Notes10 years5.5% coupon

Bookrunner, Joint Lead Manager and Sole Duration Manager

August 2009

US$4.1bn

PEF - Project Finance Debt/ Syndicated Loan

Mandated Lead Arranger

August 2009

USD125.0m

Convertible Bond 5 years6.5% coupon

Sole Bookrunner

September 2009

USD250.0m

High-Yield Bond10 years7.375% coupon

Co-Manager

September 2009

US$450.0m

144A Fixed-rate Notes7 years11.75%

Co-Manager

November 2009

USD972.0m

Rights Issue

Joint Lead Manager and Underwriter

June 2009

USD850.0m

Project financing of an ultra deepwater drillship due for delivery in 2011

Joint MLA

January 2009

MYR1.0bn

Islamic Medium Term Notes

Joint Lead Manager and Bookrunner

July 2009

US$230.0m

Convertible Bond 6 years1.75% coupon

Joint Bookrunner and Joint Placement Agent

March 2010

US$300.0m

Fixed-rate Notes 8 years8.125% coupon

Joint Bookrunner

March 2010

28

HSBC’s DCM capabilities

Euromarket Bonds 2010 YTD All Sterling issuance 2010 YTD International Bonds 2009

Source: Bloomberg official league tables

Best Global Debt House

2010 Best Bank Team in Euro by

Voted by borrowers

2010 Best High Yield Bank Team by

Voted by borrowers

2010 Best Bank Team in Sterling by

Voted by borrowers

2010 Best MTN Dealer by

Voted by borrowers

2010 Best Overall Corporate Bank Team by

Voted by corporate borrowers

Rank Bookrunner Amt (USDm) Iss. %Share

1 Barclays Capital 338,531 807 8.2

2 JP Morgan 270,675 754 6.5

3 Deutsche Bank 263,921 822 6.4

4 HSBC 253,594 863 6.1

5 Citi 228,115 589 5.5

6 RBS 225,665 714 5.4

7 BNP Paribas 205,549 667 5.0

8 Morgan Stanley 176,879 424 4.3

9 BoA ML 174,982 446 4.2

10 Goldman Sachs 163,461 385 3.9

Rank Bookrunner Amt (GBPm) Iss.%

Share

1 RBS 6,234.04 46 18.6

2 Barclays Capital 4,804.80 51 14.4

3 Deutsche Bank 4,271.61 23 12.8

4 HSBC 4,000.00 27 11.9

5 RBC Capital 3,144.46 17 9.4

6 JP Morgan 2,173.32 10 6.5

7 Nomura 1,701.25 6 5.1

8 UBS 1,469.53 7 4.4

9 Lloyds TSB 1,174.17 11 3.5

10 Goldman Sachs 832.50 7 2.5

Rank Bookrunner Amt (USDm) Iss. %Share

1 Deutsche Bank 64,751 266 7.9

2 HSBC 53,844 230 6.6

3 Barclays Capital 52,312 193 6.4

4 JP Morgan 47,304 214 5.8

5 BNP Paribas 46,722 202 5.7

6 Societe Generale 40,447 113 4.9

7 Credit Suisse 34,473 159 4.2

8 Credit Agricole 33,368 120 4.1

9 RBS 32,546 189 4.0

10 UniCredit Group 30,724 101 3.8

29

April 2010

€4.2 billionRights Issue -GermanyJoint Global Coordinator and Bookrunner

EMEA EquityOfferingsCredentials

December 2009

£13.5 billion

Rights Issue - UK

Joint Bookrunner

December 2009

€2.1 billion

Rights Issue -France

Joint Bookrunner

April 2009

US$952 million

IPO - Qatar

Joint Bookrunner

December 2009

US$1 billion

IPO - France

Co-Lead Manager

EMEA IPOsCredentials

March 2010

€748 million

IPO – Germany

Co-Lead Manager

April 2010

US$3 billion

IPO - Spain

Joint Lead Manager

Americas Equity Offerings Credentials

September 2009

US$1.5 bn

FO - US

Joint Bookrunner

June 2009

US$4.3 bn

IPO - Brazil

Co-Lead Manager

February 2010

US$150 million

FO - Brazil

Joint Bookrunner

HSBC is a major player in today’s equity capital marketsLeague tables: leading player in IPO and Rights issues

A leading Global player in ECM

EMEA IPOs 2008-2009

Bank US$m Issues Mkt

share1 JP Morgan 4,155 7

9.9%2 HSBC 3,674 10

8.7%3 Morgan Stanley 3,522 10

8.4%4 Samba Financial Group 3,242 3

7.7%5 Goldman Sachs & Co 3,065 9

7.3%6 Deutsche Bank AG 2,490 6

5.9%7 Credit Suisse 2,200 9

5.2%8 Citi 2,045 6

4.9%9 Banque Saudi Fransi 1,912 2

4.6%10 UBS 1,668 8

4.0%

EMEA Rights issues 2009-2010 YTD

Bank US$m IssuesMkt

share

1 JP Morgan 38,305 4822.5%

2 HSBC 20,523 1512.0%

3 Goldman Sachs & Co 14,361 118.4%

4 Credit Suisse 13,041 157.6%

5 UBS 10,381 236.1%

6 Deutsche Bank AG 10,218 226.0%

7 BoA Merrill Lynch 10,095 275.9%

8 Morgan Stanley 9,547 185.6%

9 BNP Paribas Group 7,562 214.4%

10 Citi 4,980 152.9%

Source: Bloomberg and Dealogic ranked by Global Co-ordinator or Bookrunner, includes Prudential rights issue

Asia Equity Offerings Credentials

November 2009

US$356 million

IPO - HK

Joint Bookrunner

June 2009

US$1,910 million

Sell Down

Joint Lead Manager

April 2010

US$500million

IPO - HK

Joint Bookrunner

Ongoing

US$21 billionRights Issue - UK

Joint Global Coordinator and Bookrunner