Why Gamble?

DryShips yesterday announced that it had agreed to cancel the previously declared acquisition of four Panamax dry bulk carriers from companies beneficially owned by Mr. George Economou for a purchase price of $400 million. Based upon the deterioration in the dry bulk market and the inability to obtain bank financing, which would necessitate a significant cash outflow from the company’s cash reserves, the Audit Committee of the Company determined that it did not make sense to proceed with the transaction.

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Merrill Lynch Delivers ATM Machine to Ship Finance International

This week Ship Finance International Limited (“SFL”) qualified as a WKSI or Well Known Seasoned Issuer by having $700 million of unaffiliated equity capital outstanding. With Mr. Fredriksen’s substantial indirect holdings being treated as an affiliate, this is quite an accomplishment. As a consequence, SFL’s fillings are immediately effective and do not require SEC review.

Simultaneously, the company took the step of filing a shelf registration to offer any of the following securities: common shares, preferred shares, debt securities, including guaranteed debt securities, warrants, purchase contracts or units. Having set the groundwork, the company than issued, under the terms of this shelf registration, a prospectus supplement under which they entered into ATM Equity Offering Sales Agreement with Merrill Lynch for up to 7 million shares of its common shares. Under the terms of the agreement, SFL may offer and sell its common shares at any time and from time to time through Merrill as its sales agent. Sales will be made by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale, at prices related to the prevailing market price, or at negotiated prices. Merrill earns a 2% commission on the sale.
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Gray skies are gonna clear up…

Gray skies are gonna clear up,
Put on a happy face;
Brush off the clouds and cheer up,
Put on a happy face.
Take off the gloomy mask of tragedy,
It’s not your style;
– Put On a Happy Face, Lyrics by Lee Adams and Music by Charles Strouse from Bye Bye Birdie.

Despite continued market weakness and volatility, Pareto held a highly successful Shipping Conference last Friday in New York and they may have partially succeeded in putting a happy face on the industry. But then again, only one dry bulk company spoke. In fairness, however, Erik Helberg of Pareto did correctly note that the presenters represented some of the top public shipping companies.  Given the multitude of excellent presentations and the need to avoid favoritism, we have below incorporated Pareto’s initial key global takeaways supplemented by some of our favorites.

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Deal of the Year Nominations

It is with great pleasure we make this call for nominations for the best in ship finance transactions for 2008.  It is for us a fascinating way to celebrate your achievements.

To do the job properly we are sending this call for nominations to you so that you and your colleagues can send us Deals that you feel merit consideration for an Award.

This year we are considering Deals in the following categories:

Shipping Firm of the Year
Innovation
Export Credit
Debt Private Placement
Project Finance
Bank Debt
Restructurings
Public Equity – IPO and Secondaries
Private Equity
Leasing
M&A
Structured Finance
Dealmaker of the Year

There are two ways to respond:

1.     By visiting the following link:
http://www.shrinkmylink.com/gnehton and filling in the survey as prompted.  This is an anonymous way of submitting Deals for consideration. Or,

2.     By simply emailing, or sending us those Deals you feel merit consideration.

The more detail the better as our editors review the transactions and while you may have lived with a Deal for months and understand every nuance, we benefit from your input.

This is one exercise we undertake each year that gives us enormous pride in the achievements of our friends.  We salute you without having even seen a submission and look forward with anticipation hearing back from you. We are delighted to celebrate and acknowledge the contributions of you and your team to the industry.

The Deadline for submissions to be considered is December 31.  The Awards will be announced in Our February issue.

Thank you and congratulations in advance.

The Dark Side

On Tuesday, a team from Watson, Farley and Williams (“WFW”) shed some light on the dark side assuring a full house of bankers and other concerned parties that they had nothing to fear in these difficult times as long as you have the right team of advisors. In a seminar entitled, “Troubled Waters: Protecting Asset Financiers in the Current Market,” Frank Dunne, Dan Rogers, Al Yudes and Neil Quartaro described the firm’s approach “to workouts, enforcements, bankruptcy, and after.” Each provided their unique perspective based upon their specialty. The mix of the presenters included the more “experienced” partners from the 80s which brought great value and interest in terms of examples or “war stories.”
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The Camel’s Nose

In a carefully orchestrated web meeting and presentation, DnB NOR ASA (“DnB”) responding to concerns about the quality of its shipping portfolio provided interested parties an opportunity to get a general picture of the portfolio and ask questions. Understandably, the bank had to balance the amount of disclosure against the possibility of the camel sticking his nose in the tent or, in today’s kids’ parlance, “TMI” (too much information).

DnB is rightfully proud of its global shipping portfolio which it describes as “..consisting of loans to the leading industrial players. These clients are characterized by extensive resources, a high level of fixed contracts on their vessels, strong equity and healthy liquid reserves. The credit quality of DnB Nor’s shipping portfolio, measured in terms of expected losses, is better than the average for the overall corporate market portfolio (emphasis ours).
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Testing the Waters

As a consequence of its insolvency, Allco this week awarded Citi the advisory role for the sale of it shipping affiliate, Allocean. This business is fundamentally sound with all the ships on charters, the charters current and the debt in place. The company owns a diverse fleet consisting of tankers, bulk carriers, containerships, LPG carriers and offshore supply vessels (see chart below). In addition it has a substantial orderbook of 15 vessels to be delivered in 2009.
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“Don’t Look Back. Something May Be Gaining On You”

Seeking greater certainty in these unsettled times, DHT Maritime Inc. (“DHT”) announced on Monday that it had reached an agreement with OSG under which OSG has declared part of the extension options for the seven vessels on time charter upon expiry of the vessels’ current initial charter periods. It is notable that the options were declared early and as a consequence DHT’s fleet will have 100% fixed charter coverage from 2009 through 2011 with one of the world’s premier tanker owner/operators.

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Allco Shows What it Takes

Marine Money observed first hand during the restructuring years of 2000 and 2001 the absolute value of working collectively with lenders and creditors to keep a distressed business whole and trading.  Two contrasting approaches come instantly to mind, the Bondholders destruction of over a billion dollars of value in their mishandled bust up of Fred Cheng’s Golden Ocean (value Mr. Fredricksen astutely cashed in on) versus the Tsakos family’s elegant handling of their Global Ocean restructuring or even Ravi Mehrotra’s strong holding together of Amer Reefer, both of which returned far greater value to stake holders by remaining viable on-going concerns.
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Thanksgiving

In these most difficult economic times, it is certainly difficult to reconcile the act of thanksgiving with businesses failing, huge layoffs and record unemployment. We learned that our industry is not immune and in fact, acted this week and laid-off many of our friends. We remain hopeful that this time companies will recall how profitable this sector has been over the last four years and how valuable their people are. Nonetheless, we fear it will get worse before it gets better. We caution the corporate leaders not to tear out the heart as it will be most difficult to replace when the market turns and there is again much money to be made.
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