Lombard contains costs for Africa Express Line
- $4.5m helps enable Africa Express Line to move away from renting to the flexibility of leasing
- Lombard provides bespoke finance solution recognising the customer's operational needs
- Lombard structures tax efficient finance solution for Africa Express Line
Africa Express Line Ltd (AEL) is a British registered shipping company established in January 2002. Located in Paddock Wood, Kent, AEL operates a fleet of eight refrigerated (reefer) vessels and specialises in the handling and transport of perishable fresh fruit cargoes between Europe and West Africa.
Since it's inception, AEL has rented it's reefer containers. However there was a high cost involved in reconditioning the containers for return, and it was recognised that purchasing the containers would provide greater flexibility and reduce costs.
The company has 2,400 40-feet reefer containers and it was agreed that leasing with it's end of term purchase options provided the best solution. While AEL intends to move half of the containers to lease over the next five years, the initial tranche was 250 containers with a value of $4.5m.
The challenge for AEL was in gaining credit approval for what is a successful but relatively small shipping business. Finance companies were used to dealing with larger businesses and had difficulty in understanding AEL's business model.
Tom Mckenzie, AEL's Finance Director, explains, "Lombard worked closely with us and understood our business needs, despite the pioneering nature of the deal within the container leasing business. The containers are usually ordered in very large volumes but Lombard worked closely with us on the purchase of the containers from China and structured the deal to be tax efficient. It also delivered the funding very quickly."
Simon Cox, Lombard's Relationship Director, says, "We structured the funding in US dollars over a seven year lease with sales agency, and also worked with the auditors to deliver a solution that provided off-balance sheet benefits.
The overall package gives AEL improved flexibility and general cost efficiencies, as well as savings provided by using newer containers that have lower operating costs. Finally, we were able to utilise the expertise of Group Tax and VAT to highlight potential issues and provide solutions to protect against future tax liabilities."
AEL and Lombard hope to work together in the long term and to strengthen their positive relationship further. Mckenzie says, "We intend to execute a similar deal for an additional 250-400 containers during the course of 2011 and we hope we will be working with Lombard on this."
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