Freshly Minted – June 10, 1999

Live from Beach Club, Aker Brygge, Oslo, Norway

The whole correspondent team is in Oslo at Marine Money’s widely successful Ship Finance Forum. So we are serving you hot items from the place to be in Ship Finance, this week.

Conference papers from Oslo are available for $400

“… .and that you in the shipping community really take advantage of these gloomy times to put your business together” and,” On behalf of all our investors in our funds we sincerely wish you good luck, we know you will need it”. (Ragnhild Wikborg, Odin Fond Management).

“No, I don’t think it was the size of the IPO that was the problem”. (Peter Goodfellow, Stelmar Tankers, and Philip Clausius, Columbia Ship Management who both had failed equity offerings in the U.S.).

Lars Carlson of Concordia has added 3 important words to its company motto “Oil should only travel first class at economy cost”.

“Not a whole lot” on the question “what can bulk shipping learn from the cruise industry?”. Ketil Arvesen of Christiania Markets.

“The equity window is closed, but no better time to prepare. By the time the window is open it is too late”. (Jeff Pribor, of ING Barings Furman Selz). Continue Reading

Freshly Minted – June 3, 1999

In honor of Nor Shipping and Marine Money’s Ship Finance Forum, which will be held in Oslo on June

9th and 10^th, a bit of humor for our ex-pat shipping friends living in Norway…. You know you’ve been in Norway too long when:

• You think there is no such thing as bad weather, only bad clothing.
• You know at least five different words describing different kinds of snow.
• It’s acceptable to eat lunch at 11.00 and dinner at 15.00.
• You can prepare fish in five different ways without cooking it.
• You don’t look twice at businessmen in a dark suite wearing white sport socks.
• When a stranger on the street smiles at you, you assume that:

1. He is drunk;
2. He is insane;
3. He is an American;
4. He is all of the above.

HIGH YIELD

Other than Hvide and Golden Ocean, this week was a lot quieter than last week on the high yield front. Restructuring meetings with TBS and Global have left involved parties decidedly pensive.

Lazard reported that last week saw $12 million in outflows from high yield funds, which marks the third consecutive week of cash moving in that direction. 10 new deals priced and 2 were postponed. According to Lazards, the market remained volatile and generally weaker amid interest rate concerns The shipping sector has been relatively quiet and action on shipping bonds has been specific to impending restructurings and defaults. Continue Reading

Freshly Minted – May 27, 1999

A SALTY SHIPPING STORY FOR MEMORIAL DAY BARBECUES

This is the transcript of an ACTUAL radio conversation of a US naval ship with Canadian authorities off the coast of Newfoundland in October. Radio conversation released by the Chief of Naval Operations. Americans: Please divert your course 15 degrees to the North to avoid a collision.

Canadians: Recommend you divert YOUR course 15 degrees to the South to avoid a collision. Americans: This is the Captain of a US Navy ship. I say again, divert YOUR course.

Canadians: No, I say again, you divert YOUR course.

Americans: THIS IS THE AIRCRAFT CARRIER USS LINCOLN, THE SECOND LARGEST SHIP IN THE UNITED STATES’ ATLANTIC FLEET. WE ARE ACCOMPANIED BY THREE DESTROYERS, THREE CRUISERS AND NUMEROUS SUPPORT VESSELS. I DEMAND THAT YOU CHANGE YOUR COURSE 15 DEGREES NORTH OR COUNTER-MEASURES WILL BE UNDER TAKEN TO ENSURE THE SAFETY OF THIS SHIP.

Canadians: This is a lighthouse. Your call.

STORY OF THE WEEK Continue Reading

Freshly Minted – May 20, 1999

HIGH YIELD

The high yield bond buying community has begun to take a more sectoral approach to shipping issues. CSFB was the first to jump into shipping head first and as you will see from our analysis on Alpha’s restructuring, the cheaper you get into a deal, the easier it is to find the exit.

ULTRAPETROL

Ultrapetrol has tightened to bid 86, though first quarter earnings are not out. Why? Could it be because Fortune Magazine’s bond guru John Dizard picked the shipping industry in the May 24th issue as his top pick for value. Dizard says that “the bad news is that it (shipping) is overbuilt, its recovery is uncertain and distant, and everybody hates it. The good news is that the bad news is already factored into the bond prices, and you have a pretty attractive market in buying and selling the underlying assets, namely, the ships.” Dizard’s advice: “go for the most secure paper, such as first mortgage notes.” Dizard recommends Ultrapetrol and Moran.

GLOBAL OCEAN

Global Ocean Carriers announced that it has retained Chase Securities to explore strategic alternatives, “which could involve a possible restructuring of its 10-1/4% Senior notes.” Global reported a net loss of $13.5 million for fiscal 1998. Bonds have tightened on the news. Is the market saying that shipping bonds are worth more “dead than alive”? Global’s move to appoint Chase comes as little surprise as Chase arranged a $250 million syndicated facility for Tsakos controlled Oslo-listed MIF in the spring of 1998. MIF, which is an owner/operator of modern tankers, is currently exploring a possible stock listing in the US. Continue Reading

Freshly Minted – May 13, 1999

HIGH YIELD

The high yield bond buying community has begun to take a more sectoral approach to shipping issues. CSFB was the first to jump into shipping head first and as you will see from our analysis on Alpha’s restructuring, the cheaper you get into a deal, the easier it is to find the exit.

ULTRAPETROL

Ultrapetrol has tightened to bid 86, though first quarter earnings are not out. Why? Could it be because Fortune Magazine’s bond guru John Dizard picked the shipping industry in the May 24th issue as his top pick for value. Dizard says that “the bad news is that it (shipping) is overbuilt, its recovery is uncertain and distant, and everybody hates it. The good news is that the bad news is already factored into the bond prices, and you have a pretty attractive market in buying and selling the underlying assets, namely, the ships.” Dizard’s advice: “go for the most secure paper, such as first mortgage notes.” Dizard recommends Ultrapetrol and Moran.

GLOBAL OCEAN

Global Ocean Carriers announced that it has retained Chase Securities to explore strategic alternatives, “which could involve a possible restructuring of its 10-1/4% Senior notes.” Global reported a net loss of $13.5 million for fiscal 1998. Bonds have tightened on the news. Is the market saying that shipping bonds are worth more “dead than alive”? Global’s move to appoint Chase comes as little surprise as Chase arranged a $250 million syndicated facility for Tsakos controlled Oslo-listed MIF in the spring of 1998. MIF, which is an owner/operator of modern tankers, is currently exploring a possible stock listing in the US. Continue Reading

Freshly Minted – May 6, 1999

BREAKING NEWS

SCHOELLER GROUP

After completing its roadshow, the Schoeller Group’s $114 million IPO, Columbia Container Shipping, has been “postponed” due to “market conditions”. Underwriters of the deal were Paine Webber, Lazard Freres and Prudential. See the next issue of Marine Money for the Deal in Depth.

TBS

TBS failed to make its semiannual coupon payment which was due early in the week. The bonds traded up on the announcement. The news came as a surprise to just about everybody we spoke with. While the company has a 30-day grace period by which to cure the coupon default, high yield veterans say this very rarely happens. TBS has appointed DLJ to examine the company’s restructuring options. As we reported in Freshly Minted 2 weeks ago, Chase tightened up on TBS’s credit facility requiring the company to put $1 of equity into the company for every $1 it took from the revolver.

One reason that the failure to pay the coupon may have been surprising was that in its 20-F, which was filed on March 31, 1999, the company painted a very positive picture of its prospects. Unlike Pacific & Atlantic which warned bondholders of the possibility of an upcoming default, TBS management proclaimed that it was in good shape for at least another year. We quote from the 20-F:

Based upon the current and anticipated level of operations, the Company believes that cash flow from operations, permitted borrowing under the Working Capital Facility (and any replacement thereof) and available cash will be adequate to meet the company’s anticipated requirements for working capital, budgeted capital expenditures and scheduled payments of principal and interest on its indebtedness through at least the next 12 months. Continue Reading

Freshly Minted – April 29, 1999

HIGH YIELD

ALPHA

After taking a closer look at the Alpha 6K, it has become clearer to us why CSFB was willing to take the role as a white knight. We understand that CS has a cost basis on its Alpha bonds of around 28 cents. Unlike many reports no cash offer has been made to the bondholders holding the remaining 25% but we would not expect CS to pay any more than 25cents. If they can tender for all of the bonds at 25 cents their cost basis comes down to 27cents. From there it is only a quick calculation to see that CSFB will stand to earn $17.5 million as soon as Mr. Economou has the bank financing to buy the fleet back. We think he does.

$17.5 million or not, CSFB are not in this to become shipowners and would not act as a “trading post” unless Mr. Economou could guarantee that the option would be exercised. Mr. Economou has also ensured himself a $3.0 million success fee, if he, as the company’s financial advisor, manages to restructure the original issue.

Read our May hard cover issue for a complete analysis of the Alpha restructure as well as a detailed look at the Colombia IPO. The issue also includes 2 years of historic ship mortgages, a complete directory of 85 Maritime Financial Institutions, as well as all the high yield analysts and issuers. Continue Reading

Freshly Minted – April 22, 1999

HIGH YIELD

Slow week due to Bear Stearns high yield conference which pulls a lot of high yield people out of the office. Enterprises Shipholding was the only shipping credit that presented.

ALPHA

Alpha Shipping has filed a document with the SEC which outlines a proposed restructuring plan. In a nutshell, bondholders will be given the choice of taking 37 cents in cash or receiving an equity stake in a new company. It appears that CSFB is providing the financing. Bondholders will hold 100% of the equity in the new company. Mr. Economou has the option of purchasing the ships back for $64.75 million. Last week Alpha put its 7 ship reefer fleet up for sale through Klaveness in Oslo.

PACIFIC & ATLANTIC

Pacific and Atlantic has stated that the company will not meet its May 31st coupon of $7.4 million from earnings. To quote the company’s 20-F “based on current levels of freight revenues and anticipated market conditions, the company expects that its liquidity requirements for the next 12 months will not be met by cash flow from earnings of the vessels. The company is currently involved in discussions with its underwriters in order to meet its short and long term liquidity requirements. The Company’s shareholders have expressed a willingness to continue to support the Company with additional financing subject to a reasonable solution to the company’s liquidity problem. There can be no assurance that such financing will be available until a solution is found.” The “contingent” language sounds a little like the PanOceanic situation in that the sponsor will only put money into the deal if bondholders agree to something in advance. Continue Reading

Freshly Minted – April 15, 1999

HIGH YIELD

Seems to be a lot more action in the wild world of shipping high yield. More buyers and bids are coming out of the woodwork. Action is result of optimism about Asia and appetite in high yield. Wall Street Journal Article “Apocalypse No!” (April 14^th) is pretty encouraging for shipping prospects.

MC SHIPPING

Citicorp has a buy on MC Shipping and they have issued research. If you’d like to get a copy, give us a call. Not much coupon risk but 13 of MC’s 23 ships are coming open between now and 3^rd quarter 1999.

GOLDEN OCEAN

We understand that a block of Golden Ocean traded around 22. Elsewhere on the VLCC front, Papacristides and Lowes have ordered up to a total of 18 VLCCs at $66.25 million each with conventional payment terms. The order is for 2 with a 2+2 at Daewoo, Hyundai and Samsung. (i.e. 2 option 2 option 2 at 3 yards) The first ship is scheduled for delivery in 4^th quarter 2000.

ERMIS

Ermis restructuring continues though we understand it is by no means a done deal. Jefferies and Burbank (shipbrokers) are representing bondholders, Blackstone is representing the company. In a nutshell: plan keeps Ermis out of bankruptcy and bondholders get note with 90% face of original value with 25% of equity. Company didn’t put in any fresh cash. Deal gives them common stock and management fees that have been slashed back to pre-offering levels. Continue Reading