Pareto Places $60 Million of Fresh Equity for B+H

Pareto Places $60 Million of Fresh Equity for B+HUsing the issuer-friendly Form Reg F, which allows a foreign issuer to sell securities to foreign investors through a very simple process, Pareto Securities raised $60 million of cash for tanker company B+H this week. As we understand it, the deal was scaled back from an initial size of about $120 million and pricing was $18.50, about 5% below the trading price at the time. Although we have not done the math, the valuation is somewhere in the vicinity of net asset value. As we understand it, the newly issued shares will trade over the counter in Norway (until BHO lists there officially), and the U.S. lock-up period is only 40 days for investors. As you can see from the accompanying stock price graph, the shares have experienced notable selling pressure since the deal was announced.
Despite the reduced size and valuation that resulted from recent weakness in both the equity and shipping markets, this is an important deal for B+H for a few reasons. First off, the company now has a meaningful amount of buying power and we would be very surprised if they don’t have some specific ideas about how to use it. We would speculate that if B+H has, or will identify, a deal with some charter coverage (as they recently did with the OBO on charter to Sempra), bank financing could add another $200 million in dry powder. B+H management has proven themselves to be very experienced dealmakers with the patience required to do sensible deals in today’s market. Moreover, the new issue will reduce Michael Hudner’s stake to about 50% of the outstanding shares and thereby increase the free float by about five times.

Easy Decision

With the choice to lend commercially, where one is exposed to the risk of the borrower defaulting, or a “risk-free” loan, which would you do these days if you were a bank? Stephen Antczak and Jung Lee of Cantor Fitzgerald explained in their recent report titled “Capital Structure Insights: It’s All About Consistency” why banks may have little interest or incentive in lending commercially at this juncture.
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Not To Be Left Behind

Last week, Paragon Shipping Inc. filed a shelf registration to sell up to $500 million of various equity and debt securities. In addition, the company registered 9,214,206 shares to be sold in a secondary offering. These shares are controlled by affiliates of Mr. Michael Bodouroglou, the company’s chairman and chief executive officer. Proceeds, excluding the secondary shares, may be used to make vessel acquisitions and capital expenditures, debt repayment, working capital and general corporate purposes.

Paying the Bill

On Tuesday, after the market closed, Aegean Marine Petroleum Network announced that it would utilize its recently effective shelf registration to issue 3,906,000 shares of its common stock in an underwritten public offering. The closing price of the shares was $32.45, which would equate to an equity raise of approximately $126 million on a gross basis. The next day, in a market roiled by news of restricted lending in China, the shares traded up $0.23 to $32.72.
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Structuring Upside while Minimizing the Downside

Last week, Diana Shipping announced its intention to co-invest in a new company expected to invest in containerships over the next 12 to 18 months. Diana intends to invest $50 million for a minority stake, with the balance, as yet undisclosed, being raised in a private offering to institutional and accredited investors. Diana would further benefit from providing administrative and vessel management.
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Blowout!

As a seasoned issuer, Teekay Corporation wasted no in pricing what was expected to be $300 million of senior unsecured notes due in 2020. On Friday, not only did they announce highly competitive pricing, but also that the offering had been upsized by 50% to $450 million.

With a coupon of 8.5%, the deal was priced at 99.181% to yield 8.625% or 492 bps over like term Treasuries. Details of the transaction are shown in the Guts of the Deal below.

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Shipbuilding Capacity at the Opening of a New Decade – Where Are We?

By Worldyards

We at Worldyards pride ourselves in having relatively accurate (yes, everything is relative) measures on both shipbuilding capacity and size of the orderbook, therefore we think it is appropriate to end 2009 with our final public market comment on capacity. We discussed this issue in numerous occasions in the past (see, Reality Check – 3 years on dated 18 March 2008), at most times throwing cold water into various supply-side scares such as massive delays, lack of main engine and crankshafts etc.. We do naturally track the numerous delays and failures of some shipyards before they cut the first steel. Such misfires have been part and parcel of the shipbuilding landscape for many years. Our capacity figures represent fact-based tracking of all expansions and productivity increases. These measures to record shipyard facility capacity are combined with a detailed tracking of orderbook progress to indentify instances where the contracted orderbook will fall short of projections due to either shipbuilder default (construction delays) or else buyer problems (that result in either outright default on contract or a hard-fought-for mutual agreement to terminate or reschedule). Continue Reading

NYMAR Live from the NYSE.

The new year’s first serious shipping gathering in NY took place under the aegis of the NY Maritime Association at the New York Stock Exchange.  It was an animated audience that filled the Stock Exchange’s stately hall, though we noted the Exchange’s head of events was relieved that unlike Marine Money Week in 2008 he did not have to contend with 150 more guests than NY City fire codes allowed.

Peter Shaerf, AMA Capital partner and President of NYMAR welcomed the crowd and Bob Gruendel, Partner at DLA Piper brought us to the point of Gazing into the Future through the Crystal Ball and wisely at that point turned to Peter Georgiopoulos, Chairman of Genmar, Genco and Aegean, Duncan Neiderauer, NYSE, CEO and Harvey Pitt currently CEO of Kalorama Partners, but former Head of the US Securities and Exchange Commission.

The following is a short summary paraphrasing the comments, note paraphrasing:
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Watch the Short Interest

In an article entitled “Contrarian Investor Sees Economic Crash in China,” published last week in the New York Times, reporter David Barboza describes James Chanos’ negative views on the China economy. Mr. Chanos is a renowned hedge fund investor who made his fortune through short selling and China is his latest target. Unlike the conventional wisdom, Mr. Chanos believes “that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict.”
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A Cautionary Note

While we applaud and are fervent supporters of high yield, our memories are not short. We remember the late ‘90s when bonds were the flavor of the period.  Are today’s buyers of this paper any different from their predecessors? They were, after all, both QIBs. Are the buyers deluding themselves that risk is covered by yield? Are the rating agencies doing their job? And, more importantly, how strong are the credit skills and industry knowledge of the buyers? We do recall a discussion long ago with an analyst from a major life insurance company that, in fact, underwrote our life insurance. His analysis was based an overall portfolio approach. By building a portfolio of relatively small amounts of high yielding paper, the overall risk was offset by the total portfolio return.
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