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China’s Maritime Evolution
By Rodricks Wong
Over the past decade, there has been a long and lively debate among policy makers, economists and academics about the viability of China’s “social market economy”. The leftists view China’s goal of establishing a system of market socialism, where state-owned enterprises coexist harmoniously with privately owned ones, a far more superior model for economic development and a feasible middle way between capitalism and centralised state socialism. Critics on the other hand see this as an unnatural system. They argue that misallocation of resources will prevail so long as the invisible hand’s ability to coordinate the decisions of the firms and households in the economy remain distorted by government interference and this is destined to fail. As the experts continue to debate on this topic, one thing is certain: China’s market socialism policies have chartered the development of both the shipping and finance sectors, and this has added another interesting dimension when we look at the country’s progress in ship finance.
Exotic Asia
By Kevin Oates
Pretty much the whole world is banking on Asia these days. If the economic growth rate of China and India and the other emerging economies of the region were to flounder, we would all be in big trouble. And it appears that our banking brothers are also keen on the region with many of the major global ship lenders now well established here. We feature a selection of key shipping financiers in Asia on our front cover. These include from left to right Woon Aw Yong (UniCredit Bank AG), Kartal Cona (NIBC Bank Ltd), Stefanie Koh (DnB NOR Markets, Asia), Aksel C. Olesen (Pareto Securities Asia), Katrine N. Ruud (Nordea Bank Singapore), Michiel Steeman (DVB Group Merchant Bank Asia Ltd), Meeyoung Choi (Meriel Partners), Pierre Carassus (ING Bank N.V. Singapore) and Abhishek Pandey, Standard Chartered Bank.
From afar Asia is exotic, different, apparently striding forward despite the economic turmoil in the rest of the world. It is also colourful and happy. Well, I have news for you. It is the same from close up too. I am privileged to be the new MD of our Marine Money Asia office in Singapore. I have been here for two months now, and can categorically state what a different world it is.
Who Wins?
We understand that the lead bankers involved in the Omega Navigation bankruptcy are pushing for a Chapter 7 liquidation believing that they can come out whole. This is natural as the alternative is a substantial conversion of their debt to equity, realizing a write-off and mark to market accounting on the equity. Given the young age of the fleet and market prospects in the product sector, the re-structuring scenario is far more likely.
The Right Stuff – d’Amico Gets Club Loan
On Tuesday, d’Amico International Shipping S.A. announced that its operating subsidiary d’Amico Tankers Limited – Ireland entered into a 7-year $48 million term loan facility with Credit Agricole CIB and DnB NOR for the financing of two 52,000 DWT MR Product/Chemical tanker newuildings. Proceeds will be used to partially finance the remaining installments of $56 million. The facility bears a highly competitive interest rate and is secured mainly by 1st priority mortgages and a parent guarantee. Under construction at Hyundai Mipo, the vessels will be delivered in March and April 2012.
A Move to Simplicity – Havila Shipping ASA Consolidates Interests
As part of a proposed acquisition to acquire five modern PSVs, Havila Shipping ASA announced earlier this month the successful completion of a private placement to Norwegian professional investors, international investors and US 144A QIBs of 3.77 million shares at a price of NOK 52.50/share raising approximately NOK 198 million. Of the total number of shares 2.56 million are new or primary shares with the balance of 1.21 million shares sold by the company. Both the share price, set through a book building process, and equity raised were at the low end of expectations. For more detail, see the Guts of the Deal below.
The Outcome is a Negotiation – Nautilus Gets its Deal Done
In these turbulent times, the measure of a success of a deal these days is simply getting it done. Within 45 days of the initial filing, Nautilus Maritime Acquisition Corp. announced that it had sold 4.8 million units at $10.00 per unit raising $48 million. Although somewhat disappointing in light of the targeted $60 million, the appetite was less than hoped for, but sufficient equity was raised for an acquisition. Time is short at 19 months, but that was what was negotiated and management is comfortable as shipping markets remain weak. The hoped for endgame is that assets can be acquired on the cheap or a company at a steep discount to its peers. It is also a means for a private company which has been thinking about an IPO to go public.
Orphan Adopted With Added Benefit of a Back-Door Listing of Ocean Rig Shares
Pair the brilliance of Mr. Economou with the ingenuity of Evercore Partners and problems become opportunities. On Tuesday, DryShips Inc. announced that it had agreed to acquire the outstanding shares of OceanFreight Inc. for a total consideration per share of $19.85 consisting of $11.25 in cash and 0.52326 shares of common stock of Ocean Rig UDW Inc., valued at the July 25th closing price of NOK 89 ($16.44) on the Norwegiaqn OTC. OceanFreight’s shares closed Monday at $9.47, implying a premium of 110%. The offer is not subject to any financing contingency as the cash portion will be paid from DryShip’s existing cash and the shares will come from outstanding shares currently owned by the DryShips, reducing its ownership from 78.3% to 75.9%.
FPSO Cidade de Paratay Contracted and Financing Arranged
Last week, a joint venture comprised of SBM Offshore N.V., Queiroz Galvao Oleo e Gas S.A. (“QGOG”), Nippon Yusen Kabushiki Kaisha (“NYK”) and ITOCHU Corporation announced that it, together with QGOG, had entered into 20-year charter and operating agreements with BM-S-11 Consortium, owned 65% by Petrobras SA (Operator), 25% by BG Group, and 10% by Petrogal Brasil Ltda, for the operation of the FPSO Cidade de Paratay on the Lula Nordeste field. This field is located in block BM-S-11 in the Santos basin in the pre-salt area offshore Brazil in water depths of 2,100 meters.
Exmar and BW Gas Swap
This week Exmar and BW Gas swapped vessels to better position themselves in their preferred sectors. Exmar exchanged its two VLGCs for BW Gas’ midsize fleet consisting of 3.5 mid-size carriers as shown in the chart below:
Delivery is scheduled to occur between August 15th and September 30th and will be accompanied by a cash component of $35 million payable by BW Gas to Exmar. With the transfer of the VLGCs to Exmar, the respective time charters to BW Gas will be novated, while the midsize vessels will continue to perform the existing North Sea LPG contract commitments.
Into these Volatile Markets Goes Star Bulk
In its first follow-on offering since it began operations in December 2007, Star Bulk Carriers Corp. announced on Monday an underwritten overnight offering of 16.5 million shares based upon its previously filed $250 million shelf registration. The next day the offering was upsized to 16.7 million shares and priced at $1.80 per share, a discount of 10.4% from Monday’s closing price. While the file to offer discount is somewhat higher than the average year to date of 7.2% indicated by Jefferies, recall this is shipping and the markets remain volatile. Net proceeds were approximately $28 million. In addition, the company is allocating the usual 15% of the offering or 2.51 million shares to cover over-allotments.
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