Chapter 310 One stone stirs up waves

Chapter 310 One stone stirs up waves

Chapter 310: One stone stirs up a thousand waves
When you know that there is no risk in the future and you can make a lot of money, but you have limited funds, the most important requirement is that the bank loan amount must be high enough.

To this end, even if some other concessions are made, such as transaction price or interest, as long as these two are not too outrageous, it will be fine.

Even many people who are unclear about the future are extremely dependent on banks for their business, and no matter how much debt they owe, it is not a problem.

The shipping industry has an even higher demand for bank funds than the real estate industry. If you want to develop rapidly, you have to rely on banks. This is the case for several shipping tycoons in Hong Kong.

In the following days, Zheng Yuhua held several more talks with Mitsui Engineering & Shipbuilding Co., Ltd., and Yang Wendong was also informed of the situation in a timely manner.

Finally, on January 1, the two parties reached a memorandum of understanding on cooperation, whereby Changxing Shipping will purchase 12 large oil tankers and 7 bulk carriers from Mitsui Engineering & Shipbuilding Co., Ltd. The total displacement tonnage of the 3 ships is 10 tons, and the transaction price is US$61 million.

62% of the funds were jointly loaned by Mitsui Bank and Sumitomo Bank.

However, this is just a memorandum, which is a legal obligation agreement that restricts both parties to keep confidentiality on related business negotiations before the formal signing of the cooperation agreement.
Many large-scale acquisitions and even state negotiations will have such restrictions, such as product floor prices, after-sales service and other requirements. This information is also very important business information for the manufacturer. If the cooperation is not finally reached, the buyer cannot disclose it to the outside.

Ichiro Takizawa signed the big order with a happy face, and said to Yang Wendong: "Mr. Yang, our cooperation this time is also a huge project in the Japanese shipbuilding industry. You must come in person when the contract is signed."

"Okay." Yang Wendong nodded, and then said: "This cooperation is also the first time for both parties to cooperate. I hope we can maintain this kind of relationship in the future."

Making friends with a top Japanese conglomerate would certainly be of great benefit to him. Japan itself would also be a key market for many of his industries in the future, such as culture, toys, electronic products, etc.

There is buying and selling, whether it is a country or a company, this is the best way to maintain a relationship.

Ichiro Takizawa added: "No problem. We can make any type of ship you need in the future. Even a 20-ton oil tanker is not a problem."

"That's good." Yang Wendong paused and asked, "Can you build a container ship?"

“Of course,” said Ichiro Takizawa, “but the production volume is very small because there are few buyers, and mainly because container ships rely on new infrastructure ports;

Currently, containers are mainly in a few cities in Europe and America. There are relatively few such ports in Asia. Mr. Yang, are you interested in container ships? "

Yang Wendong said: "I am interested, but the current infrastructure in Asia does not support me to buy container ships."

Without a container terminal, the efficiency of containers might be even lower than that of traditional cargo ships. After all, such large boxes cannot be moved by human labor.

Adding container infrastructure to ports around the world, and even rebuilding ports in many places, is a huge project.

Even in Europe and the United States, because container terminals have very low labor requirements, this has led to many dock workers going on strike and even sabotage, slowing down the development of the container revolution.

Ichiro Takizawa is also an industry insider. He said, "Yes, I am also optimistic about container ships. Sooner or later, they will dominate the world."

"Mr. Takizawa is very knowledgeable." Yang Wendong smiled.

In fact, many knowledgeable people can see this trend. After all, some ports in Europe and the United States have already implemented this container, and its efficiency and cost control are already obvious.

But, the millions of canal workers have too much profit, so it is difficult to move them.
The next day, Yang Wendong rushed back to Hong Kong. After returning home, he told his family what happened in Japan.

This matter has not yet spread to Hong Kong, but it will soon. After all, it is such a big deal, and the Japanese shipyard is a listed company, so it must be announced. And since it involves banks, it is impossible to maintain absolute confidentiality.

"5000 million US dollars?" Bai Yushan and Su Yiyi didn't know what to say for a moment after hearing this.

After a while, Su Yiyi asked, "Won't such a large amount of funds affect the entire company?"

"You think the funds needed are a lot?" Yang Wendong said with a smile, "But in fact, the funds needed are very small."

Bai Yushan asked: "Is it mainly because of the loan?"

Yang Wendong nodded and said, "This is one of the reasons. The Japanese bank has agreed to bear 62% of the loan, and I will also contact HSBC to let them bear part of it.

In this way, I only need to bear 10% to 15% of the funds. According to this ratio, I will need to contribute between 500 million and 750 million US dollars. "

Bai Yushan asked: "Six or seven million dollars is not a small amount, right?"

Yang Wendong added: "It's indeed a lot, but do you think I will pay it all at once? Projects have a cycle. At the beginning, I only need to pay a small deposit, and then the project will start.

We will give some more money after the construction reaches a certain level. Large amounts of money will be given after the ship is built, which will be a year or two later. In the short term, maybe only $200 million will be enough. "

This is also the charm of financial leverage. As long as you are brave enough, a little bit of capital can raise dozens of times of funds, whether it is real estate or shipping.

More than a decade later, Hong Kong's big swindler Chen Songqing made even more money with this operation. Although some of his operations were illegal, he essentially took advantage of the leverage principle of the financial industry.

Su Yiyi asked, "Wouldn't it be very risky to do this?"

Bai Yushan said, "Sister Yiyi, the risk is definitely great, but this is also normal. All Hong Kong shipping companies operate this way. For example, Dong Haoyun, Zhao Congyan and others, their own funds are far less than Changxing Group's, but the tonnage of their ships is much larger, and they are all desperately using loans."

"Yes, what I'm doing now is just the tricks left over by others." Yang Wendong said with a faint smile: "You know Bao Yugang, right? His company was invested in by HSBC. The extent of HSBC's support for him is very large, so large that I am dumbfounded. The risk is actually greater than ours."

The rapid development of Hong Kong's shipping tycoons and real estate companies was due to their courage and the rising economy due to various historical factors, which created a city with numerous business legends.

Of course, there were also failures. For example, among the top ten Chinese families in Hong Kong in the past, eight began to rise through real estate after 8. Many real estate companies before 68 were almost wiped out in the next real estate crisis. Only a few such as Cheng Yu-tung survived.

Bai Yushan asked: "I remember that Bao Yugang was willing to rent out his captain because of his business strategy. The risk should not be high, right?"

Yang Wendong shook his head and said, "The loan ratio is too high. Everything is risky. Even if the long-term rental model has low risk, if there is a problem with the operation, won't the risk be high?"

"That's right." Bai Yushan nodded and said, "But I heard from Sanders in a meeting that he was optimistic about the future shipping market, so he dared to gamble."

"Yeah, I'm optimistic too." Yang Wendong smiled.

Bai Yushan asked again: "Brother Dong, don't you want HSBC to invest in you?"

Yang Wendong shook his head and said, "It won't work. I tried it before, but Sanders didn't give me an accurate answer. I guess he thought the risk was too great."

His many operations were aimed at transporting water to alleviate drought and planning for future Middle East crises.

But in the eyes of outsiders, this investment model is too risky. After all, when so many old ships are scrapped in batches in ten years, it will inevitably have a very strong impact on normal business.

Even if you are just doing leasing, you have to replace old assets with new ones one by one. This is the norm.

Even though HSBC was optimistic about shipping, it still played it safe and chose Pao Yue-kong, who followed a long-term lease business model, rather than larger shipping tycoons such as Tung Chao-Yen. HSBC also adopted a short-term lease model, so HSBC naturally felt that it was unsafe.

Bai Yushan said, "It's for transporting water. To be honest, many people didn't understand it at the beginning. It wasn't until the drought became so serious that we understood it. Maybe Sanders will change his mind now."

"Maybe." Yang Wendong didn't care too much and said, "I will meet with Sanders tomorrow and try it out then."

Under normal circumstances, Japanese banks will only assume 50-60% of the ship loan, and for the rest, they still have to rely on Hong Kong banks. This is why Hong Kong shipping companies have to please HSBC.

Although selling shares would give HSBC a little advantage, with HSBC's full support, it would be easy to make the pie bigger, and the share given to HSBC would not be too much. Most importantly, it would be possible to establish a better cooperative relationship with HSBC, which would facilitate future operations in real estate and even overseas investment.

Bai Yushan said: "Then I hope it will be successful."

"Yeah," Yang Wendong nodded.

If other companies, including real estate, allow outsiders to invest, he will be very cautious and will inevitably need to consider many pros and cons.

But shipping is different. Although he will not give up this industry in the future, by the end of the 70s, this industry was basically no longer viable. It can be operated, but the competition is fierce and the profit is not much.

At that time, he would pay more attention to the influence brought by ship orders.

Therefore, it is negotiable that accepting investment can make the company bigger.

The next day, Yang Wendong came to the headquarters building of HSBC:

"Mr. Sanders." Yang Wendong said with a smile.

Sanders also said: "Hello, Mr. Yang, please sit down."

After the two sat down and exchanged pleasantries for a while, Yang Wendong went straight to the point and told him some of the results in Japan.

After listening to this, Sanders laughed and said, "Mr. Yang is really brave to place an order for a new ship of 60 tons at one time."

Yang Wendong smiled and said: "I am very optimistic about the future of the shipping industry, especially large oil tankers. From the perspective of global economic development, many places are in urgent need of large amounts of oil for economic recovery."

"Well, oil is the lifeblood of any country's economy." Sanders nodded and said, "I am also optimistic about shipping and am willing to support Mr. Yang."

Yang Wendong smiled and said, "Then I hope that HSBC can assume 28% of the loan for these ships. What do you think, Mr. Sanders?"

"Isn't this ratio too high? More than 1000 million US dollars, and there is no collateral." Sanders said slowly.

Yang Wendong nodded and said, "According to the current market rate of return, as long as the business is going well, large tankers and bulk carriers can recover their investment in three years, and the risk is also very low.

There is nothing we can do without collateral. The Japanese bank took the collateral, but HSBC will also receive a higher interest return.”

In the early days, HSBC and other banks in Hong Kong did not participate in the shipping loan business. One reason was that they believed that shipping was risky. The other reason was that the new ships bought by Hong Kong companies from Japan could not be mortgaged to Hong Kong banks because the Japanese banks had already taken them away.

After all, Japanese banks paid the bulk of the loan amount, and the interest rate was not very high, so Hong Kong could only accept similar unsecured loans.

Although the bank loan limit in Hong Kong is not high, it is very important. Without it, the shipowner may need to invest several times more money.

As navigation technology gradually improved and the insurance industry improved, risks gradually decreased, and HSBC gradually began to do this business, but the interest rate certainly could not be low.

Sanders smiled and said, "How about a five-year term with 12% interest?"

"Isn't this interest rate a bit too high?" Yang Wendong said with a faint smile.

The interest rates in the 60s were not very high, mainly because the interest rates in the United States were not high, which affected the whole world.

The interest rate for mortgage loans in Hong Kong is generally around 6%, industrial and commercial loans are generally 8%, and the shipping sector is a little higher, but generally around 10%.

Sanders said: "Although it is a bit high, if I take on 28% of the loan amount, then Mr. Yang only needs to pay 10% himself. What does this mean for the capital chain? I don't need to explain it, right?

Even Tung Chao-Yun had to put up more than 15% of the funds himself to buy a new ship."

Yang Wendong smiled and said, "I understand, but we have been cooperating for a long time."

The two discussed again and finally decided on the interest rate: 11.2%.

"Mr. Sanders, I wish us a pleasant cooperation." Yang Wendong said, shaking hands.

As long as the credit limit he gives himself is high enough, he can accept a higher interest rate. The future shipping profits can easily cover even an annual interest rate of 20%.

However, we still need to talk about it, the less the better.

Sanders also shook hands and said, "I will draft the loan agreement. When it is ready, we will meet together to confirm it."

"No problem." Yang Wendong nodded.

Sanders added: "Mr. Yang, although I am optimistic about your ability, you have been operating at such a high risk. You still need to control yourself a little. Long-term stable operation is the most perfect."

Yang Wendong said: "Compared to Global Shipping, I am much more conservative."

Bao Yugang was able to surpass so many century-old shipping families in just 20 years. He is indeed very capable, but high-leverage operations are also inevitable.

Yang Wendong also wants to do that, but currently no bank is willing to cover the cost and help him.

Sanders shook his head and said, "That's different. Bao Yugang adopts a long-term rental model. Even if there is a problem, the leasing company will cover it."

"That's right, but I won't adopt the long-term rental model for now." Yang Wendong then asked tentatively: "But I might consider introducing some shareholders. What do you think, Mr. Sanders?"

Sanders thought for a moment and said, "Of course. Although HSBC is a creditor bank, we generally do not interfere with your company's internal operations, as long as it is not a decision that will obviously have a major impact."

"Okay." Yang Wendong didn't say anything else.

Obviously, HSBC was willing to invest in Pao Yu-kong because of his ability and long-term rental model;

I still use short-term rentals here, which makes Sanders not optimistic in the long run;

But this is normal. In high-risk operations, if you win ten times, you will make a lot of money, but if you lose once, you may lose everything. Any bank will consider this issue.

On the third day after reaching a cooperation agreement with HSBC, the letter of intent for cooperation was completed. After both parties confirmed that it was correct, they officially signed it.

Afterwards, Yang Wendong rushed to Japan again and finally signed a letter of intent with Mitsui Shipyard and Mitsui Bank to purchase 10 large oil tankers and bulk carriers.

Some Japanese business media also heard the news. Such a large deal is very rare in Japan's shipbuilding industry.

When the news reached Hong Kong, it caused a huge uproar.

The Hong Kong Chinese Daily and the Oriental Daily News were even closer to the news and reported directly:
[US$5000 million: the largest ocean-going vessel purchase in Hong Kong’s history]

【The Birth of Hong Kong's New Shipping King】

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(End of this chapter)