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Terms Disclosed – Teekay Acquires FPSOs and Invests for the Long-term
On Tuesday, Sevan Marine ASA and Teekay Corporation announced the terms of the previously disclosed acquisition of three FPSOs from Sevan , which received the blessing of two-thirds of the holders of each of Sevan’s bond loans, and the proposed equity investment in the recapitalized Sevan.
Teekay will acquire the three FPSO units, the Sevan Piranema, the Sevan Hummingbird and Sevan Voyageur, together with their existing contracts for an aggregate purchase price of $668 million plus the remaining upgrade cost of the Voyageur which is estimated to be $110-$130 million. The first two will be acquired at closing which is anticipated to occur in Q4 2011, with the Voyageur being acquired upon commencement of its charter with E.ON, which is expected to occur in Q3 2012. Based upon his EBITDA projection of $120 million, Omar Nokta of Dahlman Rose estimates that Teekay is paying a multiple of only 6.5x.
Restructuring Scorecard
With borrowers continuing to reach debt maturities and charter markets remaining stressed, it is inevitable that more shipping companies will need to be reorganized in the coming year. To further complicate the issues, corporate capital structures are much more complex today, which means the process of restructuring is far more complex as well. The multi-tiered capital structures create more stakeholders, each with their own unique incentives. It is very specialized territory and those with first hand experience can make an enormous difference in the prospects and outcome of any reorganization, recapitalization or restructuring. We invite you to look at the program for Marine Money’s Ship Finance Forum scheduled for November 10 at the Harvard Club in New York. www.marinemoney.com
Dealogic 3Q 2011 – Will the Numbers Catch-up to the Noise?
While anecdotal evidence suggests that the bank market has gone quiescent, the latest quarterly numbers provided by Dealogic continued to show an upward trend, albeit mild, in ship lending on a nine month comparative basis. From the same period last year, the number of deals increased from 147 to 156 with volume rising from $39.0 billion to $45.1 billion. However, this overall result disguises the decline in a straight 3Q 2010 and 3Q 2011 comparison, which shows a reduction in the number of deals, from 67 to 46, and in volume from $25.7 billion to $11.8 billion. The disparate results are clearly evidenced in figures 1 and 2 shown below.
Star Bulk Shifts Lenders
Last week, Star Bulk Carriers Corp. announced the re-financing of its two existing loan facilities with Piraeus Bank utilizing the proceeds of a new $64.5 million secured term loan from HSH Nordbank and $5.3 million in cash. The loan has a five year term and bears interest at LIBOR plus a spread. Although little changes in the amount of outstanding debt, the terms of the new loan extend the average life while reducing interest costs. We also suspect that the Greek banks are not having an easy time of it, as well, making the change even more sensible.
Why Do One Deal When You Can Do Two – Teekay Teams with Marubeni to Purchase Maersk LNG
Following closely on the heels of last week’s announced transaction with Sevan, a joint venture of Teekay LNG Partners LP and Marubeni Corporation, announced the acquisition of Maersk LNG Carriers. Also thin on detail, the parties disclosed that the joint venture would acquire the ownership interests in eight LNG carriers from A.P. Moller-Maersk A/S for an aggregate purchase price of approximately $1.402 billion, which will be paid in cash with no assumption of debt. The average age of the fleet is 3.25 years making it the second youngest in the industry and the youngest among all independent owners. As far as responsibilities, Teekay LNG will provide the technical management upon turnover.
Of the eight vessels acquired, the joint venture will acquire 100% interests in six vessels and 26% interests in the remaining two (Maersk Qatar and the Maersk Ras Laffan), which are owned by limited partnerships. The limited partners will have the right to put their interests to the buyer. Of the eight vessels, five are currently operating under long-term fixed rate time charters with an average remaining term of 17 years, exclusive of extension options. The remaining three vessels are employed under short-term fixed rate time charters, however one of these includes an option which if exercised would put it in the long-term category. Based upon the current employment, the transaction will be accretive to Teekay LNG’s distributable cash flow. Although dated, the below chart describes the vessels and identifies those likely to be on long-term charter. Although not identified on the chart, known customers include Total, Yemen LNG, Woodside Petroleum, RasGas, Qatar Gas Transportation Company, Repsol YPF and the BG Group.
First Dropdown – Golar LNG Partners Acquires FSRU
Last Thursday, Golar LNG Parners LP announced that it had entered into its first dropdown agreeing to acquire the companies that own the FSRU Golar Freeze from Golar LNG Limited for a purchase price of $330 million. The vessel is currently operating under a 10 year term contract with Dubai Supply Authority with a remaining fixed term of approximately 8.6 years with the charterer’s option for a further five years.
The transaction will be financed 100% with debt, which will consist of two tranches. First, the partnership will assume approximately $108 million of senior bank debt, which matures in June 2015. The interest on this loan has been swapped to a fixed rate giving an all-in cost of approximately 4%. The second tranche is a seller’s credit extended by Golar LNG in the form of a 3-year bullet loan in the amount of $222 million, which will bear interest at 6.75%. It is anticipated that the latter will be re-financed prior to maturity with third party debt and/or in connection with further dropdowns from Golar LNG.
The US Has the Answer to Oversupply
Last week, Aker Philadelphia Shipyard, Inc. announced that it had entered into an agreement for the construction of two Aframax tankers with SeaRiver Maritime, Inc., an affiliate of Exxon Mobil. The 115,000 deadweight ton tankers are intended to transport Alaskan North Slope crude oil from Prince William Sound to the U.S. West Coast.
The transaction is valued at approximately $400 million or $200 million per vessel and does not require any third party financing. Similar vessels ordered in Asia today can be contracted for $53 million each according to Clarkson’s Shipping Intelligence Weekly.
We Erred Last Week – DryShips Correction
Pankaj Khanna of DryShips was kind enough to point out that the increase in DryShips’ shares we discussed last week was not the result of an existing ATM but instead derived from the mandatory conversion of the preferred convertible shares the company issued with respect to the acquisition of the newbuilding drillship hull 1865. The last tranche of the preferred shares related to the delivery of drillships hull 1866 will convert in the fourth quarter. We apologize for the error.
Not Pretty – Genmar Obtains Waiver
While it comes as no surprise given the state of the market, General Maritime announced on Monday, after the market closed, that it had reached agreement with its lenders to waive the $35 million minimum cash balance covenant under its $550 million revolving credit facility, its $372 million term loan facility and its $200 million Oaktree Capital Management facility through November 10, 2011 unless an event of default occurs under any of those facilities prior to that date.
In an interesting concession, the lenders agreed that the amortization payment made under the term loan facility on September 30, 2011 would be applied instead to pay down the revolver instead and such amount could be re-borrowed subject to the satisfaction of the borrowing conditions under the facility, the submission of a re-structuring plan satisfactory to the lenders under this facility and the permanent reduction on October 31st of the revolver commitments by this amortization amount.
Capital Product Partners and Crude Carriers become One and Divide the Spoils, So to Speak
Last week, the acquisition of Crude Carriers Corp. (“Crude”) by Capital Product Partners L.P. (“CPLP”) was concluded with Crude becoming a wholly owned subsidiary of CPLP. Conveniently, the partnership was able to refinance Crude’s outstanding debt of $134.6 million by utilizing its existing $360 million revolving credit facility entered into in March 2008, which is non-amortizing until June 2013. Given the low gearing on the Crude vessels this was a no brainer.
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