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People & Places – 01/04/2007
CIT Ramps up Shipping Activities
FM understands that CIT Group has hired Keith Wentzel, formerly with GMAC and Orix, to serve as the finance company’s Head of Marine lending. Keith replaces Houston based Bob O’Connor who moved to Trico last summer. Continue Reading
Playing with Debt & Equity – 01/04/2007
OOIL’s $480 million Sale Leaseback with HSH
Anyone who has ever taken classical economics has seen the downward sloping line that is intended to represent the relationship between pricing and demand (i.e. as price goes up, demand falls). A business could from there extrapolate where to fix a price so as to maximize profit. A really successful business, however, could fix the price at each consumer’s willingness to pay so that the business could receive the highest price possible in each sale while each and every consumer in the market willing to pay at least cost could afford as much of the product as he desired.
This is all a very convoluted way of saying that in an ideal market all players could buy or sell as much as a given commodity as they desire at precisely their willingness to pay. The $480 million transaction that HSH Nordbank has structured for Orient Overseas (International) Limited (OOIL) is a transaction that does just that for risk, ownership and optionality. Not all details have yet been disclosed though we understand it was priced and structured in such a way as to be attractive to all parties involved. Continue Reading
Ringing in the New Year – 01/04/2007
Last Call – Deal of the Year Awards!!
First, a thank you to all who have responded to our nominations call. We have received nominations from around the world for fascinating deals, large and small, that delivered outstanding value to clients and shareholders. Nominations have ranged from one-line deal descriptions to impressive transaction narratives complete with structural diagrams.
If you have not already participated, today is the official deadline for submissions, but any nominations we receive prior to NY open on Monday will be considered for an award. We welcome you to use our anonymous submission form online at:
http://www.surveymonkey.com/s.asp?u=658713006903.
Alternatively feel free to simply reply to this email. You may provide as few or as many details as you like, and though it is optional we would encourage you to include your name and contact details so that we may contact you if further information is required. Continue Reading
Middle East Shipping: from Strength to Strength
By Kevin Oates
On 14th February 2007 (yes, Valentine’s Day no less so why not make the most of it) Marine Money will proudly host the third Gulf Ship Finance Conference at the Grand Hyatt Hotel in Dubai. Our anchor sponsor is again Tufton Oceanic and our corporate sponsors include major owners from the region, international and regional banks and shipping service providers.
As at all our conferences we listened to feedback from our delegates last year and we have tried to include more local content this time. Not that all the speakers are from the UAE and the region; far from it. It is a noticeable ingredient of shipping companies in the region that shipping expertise is often imported from Europe and India. It is also noticeable that more and more of the shipping companies from the Gulf, as they are expanding by buying second hand and more so ordering new tonnage, are sourcing their debt from the large, traditional shipping banks of Europe. So what we end up with is a very unique agenda of local and regional shipping companies represented by either local or foreign shipping executives, and mostly major foreign lending institutions. Continue Reading
Hedging – A Risk Management Stategy
By Eddie Poe, Pasternak, Baum & Co., Inc.
Risk is an inherent part of the shipping business, and risk management is indeed a critical part of any shipping company’s management strategy to maintain or improve profitability. This concept is not new or unique, but its application and more importantly the available tools for use in risk management in shipping have been in a process of evolution over the past twelve to fifteen years.
Before then, the most common way of “hedging” was to balance one’s position by taking the opposite side in the physical market. For example, if you had sold forward freight, the only manner to hedge your position was to buy (charter) physical freight to offset your forward freight sales. Prior to working in the shipping industry, my job, as a young grain merchant, was to buy grain on the local level from the producers. This was my first involvement in the process known as “hedging,” a process that I did not fully appreciate at the time. For example, we grain merchants collectively purchased grain from the producers, thereby creating a “long cash position”. Continue Reading
Clueless about Valuation
By George Weltman
For the uninitiated, the concept of valuation is fraught with mystery and magic. However, in definitional terms it is fairly straightforward. The American Heritage Dictionary defines valuation as “(t)he act or process of assessing value or price; an appraisal.”So what does this term of art mean to its various consumers, which include practitioners of mergers and acquisitions as well as research analysts?
My journey of discovery into the meaning of this concept started with a discussion with Mr. Einar Kilde Evensen of DnB NOR Markets who provided a framework for the subject as well as referred me to an excellent website (www.damodaran.com) on valuation created by Professor Aswath Damadoran of NYU’s Stern School of Business. Continue Reading
Through the Eyes of an Investor
An adaptation of a presentation by Ms. Katherine Downs, Director, Latin America Group, EMP Global LLC, given at the 3rd Annual Marine Finance Forum – Latin America on November 14, 2006.
By way of background, EMP Global LLC is the world’s largest private equity fund manager focused exclusively on emerging markets infrastructure. It was founded in 1992 by ex-World Bank executives to fund infrastructure development with private capital and currently manages seven funds totaling $6.1 billion in Latin America, Africa, Asia, Europe and the Middle East.
Of specific interest to shipping is the AIG-GE Capital Latin American Infrastructure Fund (“LAIF”), which was formed in 1996 with a 10-year life and is consequently in divestment mode. The fund raised $1.013 billion and put more than $850 million to work in 24 projects in eight countries in the Latin American region. The investments took the form of equity and quasi-equity investments including common/preferred stock, warrants, options and convertible debt. The portfolio is diversified and includes investments in natural resources (13%), telecom (39%), power (13%) and transportation (35%).
With respect to the marine sector, LAIF has committed to invest $150 million as follows: Continue Reading
Norwegian Bonds Enjoy Banner Year
By Jim Lawrence
2006 was another powerful year for the business of ship finance. Banking budgets were made by September and the last quarter made many a bonus. While the world’s capital markets continue to grow in product and structure ranges and shipping continues to access the most competitive available capital, nowhere was the excitement greater in 2006 than Oslo, where a robust bond market propelled dozens of financings.
Pareto estimates that the size of the market reaches $4 billion dollars. Total issuance in 2005 tripled from US$900 million to US$2.85 billion. And in 2006 the amount has grown to US$4.5 billion.
Take a trip around the world and in almost every maritime finance center new or near records will have been recorded in the continuing expansion of the business. Germany, Singapore, London, New York, Paris, Oslo, Athens, Shanghai, Tokyo, Seoul – name the center and the fact is those markets are being well served by a competitive, global and creative community of capital providers. Continue Reading
And Now a Short Word for our Private Investor Readers
We know many of you have shipping well figured out. In fact some of you flat out skinned some of the industry’s high yield participants in the early part of 2000 conducting workouts as slickly as some of us brush our hair. And of course the oldest among us remember Jim Tisch, whose family private equity made a killing in the VLCC market, telling an Intertanko gathering in New York all the way back in the late eighties that shipping is really simple: “one buys fabricated steel at scrap value and watches it appreciate.” Galling I am sure to the many tanker owners who had just survived 10 of the toughest years ever.But for every Jim Tisch or Oaktree and Varde, there are countless private equity participants being shown shipping deals with far less experience. For those potential participants or new participants in this great business we utter the age-old warning caveat emptor and offer a few questions to ask yourself or your potential new partners before stepping in. Eyes open, questions answered, this business, so fundamental to global commerce, is a fun and rewarding place to park some of your cash. Continue Reading
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