Links
Stepping the Mast
This article, contributed by Bob Kunkel, is an important reminder of the history and traditions of the industry which seems these days to be more focused on values, returns and markets.
Out of the ashes of what was a “virtual shipbuilding” project in Mobile, Alabama to build three 42,000 deadweight U.S. Flag Jones Act Chemical/Crude oil/Product Carriers now rises the MV American Phoenix, a survivor of the AHL Shipping bankruptcy that occurred in 2009. The asset, a partially completed first unit, the ex-Dos Raven, is now continuing construction with new owners and a new shipyard.
Mid Ocean Tanker Company (MOTC), a joint venture of Mid Ocean Marine and Alterna Capital located respectively in Norwalk and Wilton, Connecticut purchased the hull out of bankruptcy in January 2011 for approximately $12.6 million dollars. Approximately 70% complete and with over 1.1 million man-hours already recorded in the construction, the purchase was considered more than a winner. In March 2011, MOTC contracted with BAE Shipyard of Mobile, Alabama to launch and finish the vessel. A recent Mast Stepping Ceremony held onboard on September 15, 2011 shows progress towards that completion and delivery.
EMS Buys Time to Consider Options
With interest and principal due August 19th on its two bond loans totaling NOK 446.1million, Eitzen Maritime Services ASA has been working with Norsk Tiilitsman (“NTM”), as the bondholders representative, in an attempt to modify the agreement to resolve the payment issue through the establishment of a new liquidity financing. In the interim, the bondholders granted the company two grace periods through September 2nd. On September 16th, NTM made a conditional offer consisting of a share capital increase by means of a debt conversion which would be directed to the bondholders, the issuance of a new $ 10 million senior unsecured bond, pre-committed and underwritten by the bondholders and the re-alignment of the board to reflect the new ownership structure. The transaction will also allow existing shareholders to subscribe for shares on equal terms as the bondholders. To accommodate the necessary extraordinary general meeting, NTM has further extended the grace period.
Remgro Supports Grindrod’s Growth
On Tuesday, Grindrod Limited announced that Remgro Limited had agreed to purchase 133,333,334 new ordinary Grindrod shares at a price of R15.00 per share, an 8.8% premium to the unaffected 30 day VWAP and a 5.4% premium to the 120-day VWAP. The purchase represents approximately 22.3% of the post-issue ordinary capital and makes Remgro the largest shareholder of the company followed by the Grindrod Family. The gross proceeds of the offering total R2 billion and will be used to expedite the company’s substantial capital expenditure program largely focused on its strategically positioned ports and terminals business and, in particular, phase 4 of the Maputo Coal Terminal. While this is the company’s stated focus it will not forsake strategic investments in its other businesses including shipping, logistics and trading. Wherever they invest, the company targets a minimum 15% return on shareholders’ funds.
Rand Raises Equity
Last week, Rand Logistics, Inc. (“Rand”) announced a follow-on offering of 2.975 million shares based upon its existing shelf registration. Led by sole book runner, BB&T Capital Markets, the proceeds of the underwritten offering are earmarked for the partial financing of two bulk carriers, one of which is a self-unloader, to be acquired and for general corporate purposes. The offering was subsequently reduced to 2.8 million shares and priced last Friday at $6.00, a 1.6% discount to the prior day’s close, but a 12.0% discount to the closing price on the date of the announcement. The shares traded up and closed the next day at $6.15. The underwriter has an option to purchase a further 420,000 shares.
Sitting with Seanergy
Having concluded our meeting with the institutional investor, Seanergy’s Investor Day presentation provided an interesting case in point. Coming under the umbrella of one of these so called stubs, Seanergy’s management, Dale Ploughman and Christina Anagnostara, took the offensive and presented its case directly to the investors. Unfortunately, Seanergy’s plight is highlighted by the numbers. The number of shares outstanding, after the 1 for 15 share split, is 7.32 million giving the company a market capitalization of $30.2 million based upon the closing price Monday of $4.12. Of the shares outstanding, a substantial majority (75%) are owned by entities controlled by the Restis family. Average daily volume averages about 7,000 shares with a free float of 1.84 million shares. On the other hand, with the stock symbol, SHIP, the shares should sell themselves at some point.
An Investor Speaks
We had the opportunity to speak with an investor who agreed to give us his perspective of the current state of the shipping equity markets without attribution. The conversation rambled as we incessantly peppered him with questions and traded “war” stories. Below please find our key takeaways.
What attracts investors? It could be a potential catalyst like the IMO regulations eliminating single hull tankers making an investment in this sector attractive. It could be the creation of a product to meet investor demand. For example, bankers utilizing the REIT model to create full payout companies and MLPs for investors, looking for yield. Or, lastly, it could be a sales pitch suggesting that shipping is the best way to play the China story.
Banking Outlook – An Insider’s View
As part of the Jefferies Conference, last week, Robin Das of HSH Nordbank shared his thoughts on ship lending during the keynote address. While none of it was surprising, it was an excellent précis on the state of the industry and for that reason we chose to de-couple it from last week’s conference review.
With a portfolio of $42 billion, of which approximately $28 billion is in the core bank, HSH Nordbank remains a player, being one of the 20-25 mainstream active lenders to the industry. The good news is that there is more liquidity than in 2010, which he terms the low point of liquidity from the banks. It remains a market of haves and have-nots with the haves benefiting from the competitive nature of the banks and enjoying improving terms including lower pricing and higher advances. Robin characterizes the market as being “all over the place.” Transaction terms vary dramatically and are specific to a combination of bank, borrower, market/asset type as well as a host of other subjective factors. The relationship over the years, the strength of the balance sheet and track record are also key factors in the credit decision.
Roadmap to Disaster – Why we should all pay attention to what’s happening in Europe…
The situation in Europe continues to deteriorate and we see the impact daily throughout the capital markets. While reams of papers are written on the subject as is often the case a simple picture explains how we got to where we are.
Help Fill this Space
We, too, are victims of the times. Deal flow has slowed and transactions, here in the West, are few and far between these days. As we report below, equity investors are apathetic, banks are dealing with liquidity issues and owners continue to search for capital. Even the Norwegian bond market has gone quiet. As your most ardent fans, we cajole you to close some transactions so we can fill these pages with the reporting you expect. Reflecting today’s reality, we are clearly falling behind Rodricks Wong, our Asian colleague. At least for the moment, if you are looking for money, head to Asia.
“Yesterday When I Was Young” – TORM Relinquishes LR1 Pool
As they should, lives as well as strategies change over time. Years ago, TORM was a founder and strong proponent of pooling. At the time, it lacked the critical mass to serve its customers and hence enjoyed the benefits of pooling, including market presence, access to COAs and stable earnings among others.
Times have changed. Today, through direct ownership and chartered-in tonnage, the company does have critical mass and pooling, while an effective strategy for many, no longer suits TORM’s current strategy in some instances. TORM examined the model particularly as it related to LR1s and determined in cooperation with its remaining minority pool partner, Reederei Nord, to close that pool. With the closure TORM will operate 25 vessels of this category with 4 being returned to the partner.
The Official Guide To Marine Finance Providers
Shipping Index
