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HNA’s Grand China Seeks Funds to Pay 10 Shipowners, Pares Fleet

November 23, 2011

Nov. 22 (Bloomberg) -- Grand China Logistics Holding (Group) Co., part of state-controlled HNA Group, is seeking funds to cover late payments owed to about 10 shipowners and paring its fleet following sea-cargo losses.

“We are actively talking to every shipowner and are actively raising funds to make payments,” President Li Zhong said yesterday in an interview in Shanghai. “Give us some time and we will definitely pay the money back.” He said the amounts owed are “not very big.”

Closely held Grand China has also lowered charter rates through re-negotiations, cut container-shipping services and drawn up plans to return all leased-in vessels, Li said, as tumbling freight rates cause industrywide losses. China Cosco Holdings Co., the nation’s biggest shipping line, has said it will lose money this year even after reaching agreements on at least 18 ships following payment disputes.

“The shipping industry isn’t in good shape because of the global trade slowdown,” Li said. “We won’t expand the business blindly.” The Shanghai-based company gets about 20 percent of sales from shipping, with the rest from businesses including air cargo and logistics.

Shipowners owed money by Grand China include Vafias Group, Golden Ocean Group Ltd. and Spar Shipping A/S, Li said. He didn’t elaborate.

Harry Vafias, managing director of Greece-based Vafias Group, said by phone Nov. 21 that Grand China hasn’t paid for its five-year charter of a capesize bulk carrier for more than two months and owes almost $2.2 million.

Failure to Pay

Jarle Ellefsen, managing director of Spar Shipping, said the Bergen, Norway-based company withdrew three supramax vessels from their five-year charters to Grand China three months ago because of Grand China’s failure to pay. Spar Shipping is calculating Grand China’s debt and deciding how to recover the money, Ellefsen said by phone Nov. 21.

Oslo-listed Golden Ocean’s chief executive officer, Herman Billung, said in an e-mail Nov. 21 that the company has one vessel on charter to Grand China “slightly above present market” rates, declining to comment further.

To boost its long-term cash position, Grand China plans to raise loans, offer bonds and sell ships, Li said, without giving further details. It will also return leased vessels as charters expire, he said. Half of Grand China’s about 70-strong fleet is leased, he said.

The shipping line also plans to pare more unprofitable container routes, after cutting services to Japan and the U.S., Li said. Transpacific services only began in March, according to a company website.

Renegotiate Charter

Grand China has already renegotiated the charter on some capesize vessels to about $20,000 from more than $50,000 a day, Li said. He didn’t identify the shipowners or say how many vessels it was trying to renegotiate rates on.

The Baltic Dry Index, a benchmark for commodity-shipping rates, has tumbled 60 percent in the past two years as expansion in the global fleet outpaces Chinese demand for iron ore, coal and other raw materials.

Grand China may also assume GE SeaCo after parent HNA Group completes the acquisition of the shipping-container lessor, spokesman Chen Ping said last week.

HNA, controlled by the government of Hainan province, agreed to buy GE SeaCo in August for $1.05 billion in partnership with Bravia Capital. The group also has investments in aviation, shipping and hotels.

--Winnie Zhu, Jasmine Wang, Isaac Arnsdorf. Editors: Vipin Nair, Neil Denslow

To contact Bloomberg News staff for this story: Winnie Zhu in Shanghai at; Jasmine Wang in Hong Kong at; Isaac Arnsdorf in London at

To contact the editor responsible for this story: Neil Denslow at

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