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Rickmers Maritime Seeks Whitewash Resolutions
Rickmers Maritime is currently seeking the approval from its independent unitholders for the waiver of their rights to receive a mandatory general offer from Polaris Shipmanagement Company (“Polaris”) – a company controlled by the sponsor Rickmers Group. The Singapore-listed shipping trust had earlier agreed to acquire a 4,250 TEU vessel under construction from Polaris at the time of its IPO last April. The purchase price is capped at $80.48 million which comprises a fixed cash portion of $47.04 million and a non-cash portion to be satisfied by the issuance of common units to Polaris of up to 33.438 million units. Rickmers Maritime will only be obliged to issue 33.438 million units to Polaris even if the aggregate value of the units is less than USD 33.438 million. The issuance of the common units as part satisfaction of the purchase price will however result in Rickmers Group holding more than 30 percent of the shipping trust that would require the German shipowner to make a mandatory take-over offer for all issued units of Rickmers Maritime under Rule 14 of the Singapore Code on Takeovers and Mergers. The Securities Industry Council of Singapore will grant an exemption to the mandatory take-over subject to the fulfillment of certain conditions. For instance, Rickmers Maritime is required to appoint an independent financial advisor for its independent unitholders and the majority of the unitholders must approve the resolution to waive their rights by way of a poll.
“Fantastisch”
Thankfully we knew the 7th Annual German Ship Finance Forum was going to be busier than the empty Emirates flight that brought us here. In our effort to save our favorite direct flight, which is being cancelled next month, we were thinking of lending Emirates Mike McCleery, based upon his tireless and successful efforts, to do their sales promotion. Unfortunately our principals demanded he remain focused on his job.
But we could not imagine how big is big and how supportive of our efforts the German shipping community would be. We had an inkling on Monday as we drove to our first meeting. Mike’s Blackberry did not stop buzzing as registration after registration poured in. The final count is not in but we think we are approaching 500 delegates.
German Focus
Marine Money together with HVB hosted the seventh annual German ship finance forum in Hamburg this week, and what resulted was fairly amazing. Not only is the market one of the most sophisticated in the world and have a does the market’s size rival that of New York, but the credit crunch has driven owners and bankers alike to think far more creatively about their approach to deal-making, from bringing in more geographically diverse bankers to realizing the full equity investment potential that can be realized by moving beyond the KG model. We believe the market is worthy of much attention and take some time here to review some highlights before moving into a discussion of some recent transactions.
Questionable Shipbuilders
Worldyards issued a report recently to stem the “bashing” of greenfield developments in China by analysts and shipping company management alike. Rather than defending Chinese greenfield yards, the report seeks more to temper a stream of sentiment against these yards, noting that it would be unwise to categorically paint Chinese greenfield yards with the same negative brush and that, while Chinese yards may be an obvious target, they don’t have a monopoly on potential failure.
Looking deeper, the Worldyards report sought to point out the vast variations among greenfield yards saying: Continue Reading
Price of Admission
Everyone involved in shipping knows how hard it is to make money and how easy it is to lose it. Shipowners must deal with volatile markets, government regulations, operational problems as well as other risks too numerous to mention. One merely has to look at the 20 or so pages at the beginning of a SEC public filing. And now in an industry renown for not paying taxes, there is tax risk, at least in one country. We have written frequently about the retroactive tax law change to the tonnage tax regime in Norway but the discussion was mainly theoretical. With the 4th quarter reporting season, we are beginning to see the real cost in concrete examples, and it is not a pretty sight.
Many years ago on our first trip to Oslo, we were fortunate enough to have the opportunity to meet with Bergesen d.y., ASA in its beautiful headquarters, Bergehus on Drammensveien. The company, as well as its headquarters building, was an intrinsic part of the fabric of Norwegian shipping, an historic and solid presence. Norwegians were proud of their country and their merchant marine and even flew the national flag on some of their vessels. No, this wasn’t the Ice Age; it was in fact the early 1980s. And despite the heavy costs of remaining in Norway, companies like Bergesen chose to remain there and keep up the tradition. Eventually, the government saw the light and the value of a merchant marine and created the 1996 tonnage tax regime. This made it feasible for companies to stay and compete with companies that chose to fly flags of convenience. The companies opted into the plan, which forgave taxes in exchange for the company’s foregoing the payment of dividends. Earnings were re-invested in the business otherwise they would remain fallow earning little interest.
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UK Fund Investors Target Shipping Risk
Marine Capital is launching Eclipse Shipping, a major shipping investment vehicle in the UK, to offer investors direct access to the global shipping sector where, they say, barriers to entry are high. The fund terms itself the UK’s “first major investment vehicle” to do this. Considering the existence of hedge funds such as those launched by Tufton and Clarksons, we imagine this is referring more particularly to the structure of the fund.
The fund will function in some ways more akin to a German KG than a typical hedge fund. It is seeking to build a portfolio of directly held shipping assets within an English company operating as a private, closed-end fund operating within the UK Tonnage Tax regime. Their return targets, however, are much higher, at 20-30%, and the fund will have a life of seven years. Marine Capital CEO Anthony Foster told hedgeweek that in shipping “returns have always been solid, averaging 24.5% annually, ungeared, for the past 10 years”.
Minimum investment is $500,000, and simple exit is possible through trade sales or a possible float in London on AIM.
Independent Tanker Company to be Spun Out in Special Dividend
Last week it was announced the Frontline was planning a spin-off of Independent Tanker Corporation (ITC). This week Frontline announced that it would begin this process with the distribution of a special dividend of 20% of the capital stock of its Bermuda subsidiary ITC; this is not unlike what initially happened with Ship Finance International. However, unlike Ship Finance ITC will be traded on the Oslo OTC Market. It will maintain its share register through the VPS, and all shareholders must hold VPS accounts.
Non-US holders of Frontline will receive one share in ITC for every five Frontline shares they hold, as will US QIBs who hold 15,000 or more Frontline shares. Other US holders will receive a cash distribution based on the market value of the ITC shares on the OTC market as ITC’s shares will not be listed for trading in the US. The record date for the dividend will be February 28 and the share distribution will take place around March 6.
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Bourbon Floats SBT on Vietnam Exchange
Pursuant to its long-term strategy and emphasis on its core shipping operations, Bourbon Offshore will on February 25 spin out 31.6% of the equity of its Sucrerie de Bourbon Tay Ninh (SBT) subsidiary on the Ho Chi Minh City Stock Exchange. This amounts to 44,824,172 shares to be priced at VND 30,000 each, valuing the offering at about $84 million and the company at about $267 million.
SBT operates a modern sugar plant that Bourbon established in 1998 with a current production capacity of 100,000 tons of sugar per year and is also developing two major real estate projects in Vietnam. The 31.6% float corresponds to the sale in installments to strategic Vietnamese investors, investment funds, employees and sugar cane growers that Bourbon announced on April 23, 2007.
J.B. Ugland Shipping to be Acquired by Siva Ventures in $300 million Deal
J.B. Ugland Shipping (JBUS), the shipping arm of J.B. Ugland Holding, was this week acquired by Siva Ventures Limited (SVL), the flagship company of C. Sivasankaran’s $2 billion Sterling Infotech Group in India. Mr. Sivasankaran views this acquisition as a strategic entrance into the shipping sector and will be retaining JBUS’s incumbent management team, led by CEO Bjorn Bergsland.
The acquisition includes JBUS’s operations in Norway and Singapore, including its charter-in and charter-out operations, which are focused on the panamax and handymax segments, as well as its FFA activities. Also included are JBUS’s assets, which comprise eight supramax bulkers, one panamax bulker and three aframax tankers in addition to a robust newbuilding program focused on the product, chemical and bulk carrier segments. The fleet is shown in the accompanying table. The purchase price is Rp 1,200 crore, equivalent to approximately $300 million. A crore, for the curious, is a commonly used unit of measure in India representing ten millions.
Does Anybody Really Know What’s Going On? Or Credit Crisis Part II
Today’s Wall Street Journal carried a very sad story on its front page. After successfully selling their family’s port terminal business, the Maher brothers fully cognizant of the risks and problems of the credit markets asked Lehman Brothers to invest a substantial portion in conservative cash-like investments. Lehman invested the funds in auction-rate securities and unfortunately the market for these securities has dried up due to credit risk fears leaving the brothers with a potential $286 million loss.
Auction rate securities (“ARS”) are long-term bonds that behave like a short-term bond and became “…popular with investors, looking for cash-like investments, because they offered better returns than traditional money-market investments but were just as easy to buy and sell.” An ARS typically refers to a debt instrument with a long-term nominal maturity for which the interest rate is reset through a Dutch auction every 7, 28 or 35 days. When there aren’t enough buyers the auction fails and bondholders who wanted to sell are left holding the securities.
The Official Guide To Marine Finance Providers
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