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Oil logistics firm and bunker supplier Titan Petrochemicals Group has signed an agreement with Kawasaki Kisen Kaisha (K Line), one of the world’s largest shipowners, for K Line to purchase US$25 million (HK$195 million) of notes, which will be exchangeable for up to 5 percent of the issued share capital of Titan Shipyard Holdings Limited, which holds Titan Quanzhou Shipyard.

Titan Quanzhou Shipyard and K Line also signed an agreement under which K Line will appoint the shipyard as its primary ship repair partner in China and provide it with a specified minimum volume of ship repair business.

Titan acquired the shipyard from its majority shareholder in October 2007 at a cost of US$170 million. This latest investment from K Line implies a market value for the shipyard of approximately US$500 million.

According to the subscription agreement, Titan Shipyard Holdings Limited will issue US$25 million 1 percet notes due March 2013 to K Line. The net proceeds from the transaction will be used for the development of ship repair facilities, providing additional funding assurance for the start of ship repair operations by mid 2009.

Under the terms of the strategic alliance agreement, Titan Quanzhou Shipyard will make available specified ship repair capacity to meet K Line’s demand. In return, K Line agrees to provide a specified volume of ship repair business. This agreement is for an initial term of ten years and thereafter will be renewed automatically for successive five-year terms.

Speaking about the agreement Hiroyuki Maekawa, K Line President and Chief Executive Officer, said, “With its advantageous geographical location, and designed and being built to the highest international standards, Titan Quanzhou Shipyard offers good prospects for development. We are excited about the opportunity to invest in this high potential facility, and to secure availability as early as mid-2009 of a stable, quality ship repair facility for our 500-strong fleet.”

Mr. Tsoi Tin Chun [pictured], Titan Chairman and Chief Executive, said, “K Line’s investment in and the appointment of our shipyard as its primary ship repair partner is a strong affirmation of Titan Quanzhou Shipyard’s potential. It shows that the value of the shipyard is being recognized by the international shipping industry. Titan is fully confident of this rapidly developing asset, in particular the ship repair business, as the recent global shipbuilding boom has given rise to a major shortfall of large scale ship repair facilities in the market.”