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Report from the Front Lines – An Independent, Objective and Informative View of MM Week
We have sometimes been accused of being lazy, perhaps true, and often of being self-serving and self-promoting through our coverage, not our fault. This year we were fortunate to have the presence and independent reporting of Erik Nikolai Stavseth of Arctic Securities, who covered the conference from start to finish on behalf of Arctic’s clients. What follows is his unbiased insightful view of the conference for what appeared to be the few of you that were unable to attend or the multitude of you that were outside working the crowd. Thank you Erik.
A Shelf and an Exit – Knightsbridge Files
Last week, Knightsbridge Tankers Limited filed a shelf registration to sell up to $200 million in securities including any of the following: common shares, preferred shares, debt securities, warrants, purchase contracts and units. The filing also provides for a secondary offering for the sale of up to 2,438,199 shares by the Golden Ocean Group Limited which received these shares as partial consideration for the sale of the two Capesize vessels to Knightbridge.
Plop-plop, Fizz-fizz, Oh What a Relief It Is” – TORM Extends
On Wednesday, TORM was able to announce an actual, as opposed to rumored, refinancing of its $900 million revolving credit facility with Danske Bank, BNP Paribas, HSH Nordbank, and SEB which was scheduled to mature in 2013 with a bullet payment of $630 million. Conditioned upon a cash equity raise of $100 million, likely a rights issue, to be completed by December 15th, the banks have agreed to extend the maturity to 2015, when it matures with a bullet payment of $480 million. The difference in the balloon payments of $150 million will be amortized during that two year period. The facility will retain the current covenant package and will include a market value test applicable from 2013 as well as dividend restrictions.
The Road to New York Is Not Paved Smoothly – Globus Concludes Follow-on Equity Offering
After what must have been a very challenging effort, Globus Maritime Limited announced yesterday that it had priced its follow-on offering of 2.75 million common shares at $8.00/share, a discount of 2.8% to the prior day’s close. Gross proceeds of the offering were $22 million of which $10.6 million will be used to partially finance the acquisition of the M/V Sun Globe, a 2007-built 58,790 DWT Supramax bulk carrier that the company has agreed to purchase for $30.3 million. Should the charter-free fair market value be less, the company will have to use additional proceeds to bridge the gap between 65% of FMV and the agreed purchase price. The balance of the net proceeds will be utilized for general and working capital purposes. Details of the transaction are shown below in the Guts of the Deal.
NewLead Sale & Leaseback
Not easily dissuaded, NewLead Holdings Ltd, despite disappointing efforts in the equity and Norwegian bond market, re-visited the sale and leaseback market announcing a transaction with Northern Shipping Funds. The latter acquired the Newlead Endurance, a 92,000 DWT Post-Panamax directly from a Korean shipyard at an undisclosed price. The seven-year bareboat charter-back to Newlead is at an undisclosed rate and includes a re-purchase option. NewLead has, in turn, time chartered out, on a back-to-back basis, the vessel to a third party operator, Deiulemar, at a net daily rate of $14,438/day plus a 50% profit-sharing, when the average of four BPI routes exceeds $15,454/day. The charterer also has the option to extend for one plus one additional year. For the first year, the rate is $15,400/day with the second year at a rate of $16,844. During the option period, there is also a profit sharing arrangement which comes into play when 110% of the average of four BPI routes exceeds the basic daily charter-out rate. The anticipated annual EBITDA, assuming operating expenses of $5,500/day is approximately $3.2 million or $21 million over the fixed term.
A Sizeable Deal and the Power of the Press – Euronav Facility
It should come as no surprise that while the banks continue to be active, there still remains uncertainty. The banks seem to have capacity but the shipping markets are not cooperating and continued deterioration will continue to make things difficult. We were reminded of DnB Nor’s Harald Serck-Hansens’s comments at his bank’s conference earlier this year where he highlighted this possibility and encouraged owners to tap the market while they can.
Moving on
After 4½ years, Kim Jones of Bank of Ireland has accepted a new position as the business development manager at Ardmore Shipping, commencing in August Good luck, Kim. Nice catch, Tony.
An Ode to Magicians
At showtime, it all looks easy, but the weeks preceding Marine Money Week are a whirlwind. It’s interesting being an insider and a somewhat dispassionate observer. You hear the plans beginning in March. The phone calls and emails begin soon after as the agenda takes form and speaker requests are sent. Worry and frustration sets in. Is the agenda good? Will we get the speakers we need? Has anyone signed up? What can we do that will make this better than last year’s? Conference calls between Guilford and Stamford are many. Then the artist of promotion sits down at his computer and starts to whip out one promotion after another, each one better than the preceding. The trickle of registrations begins. Companies plan their events around the week. First Morgan Stanley announces its investor conference, and then a newcomer, Ship Finance follows suit with an investor/analyst meeting. As if a party planner was involved, the social events begin to fall into place as DnB Citi/Watson Farley, Jefferies, BNP, Dahlman Rose and HSH Nordbank all do their thing. Still we worry. It’s hard to get the moderators and speaker’s attention. As envelopes are stuffed and badges made, the numbers creep up and begin to approach last year’s. Jim still worries and runs into the city to help some moderators and calm their nerves. Then there’s MOMA, something new and therefore worrisome, but not to worry Lorraine’s taken charge. And then suddenly its Tuesday and as always is the case it all falls into place. Jim will remain nervous till the end but it is all under control and no one knows differently. The Marine Money magicians have pulled it off again. Kudos to Jim, Matt, Mike, the irrepressible Lorraine, Julia, Elisa, Cari, Margareta, Mike, Andrea Sarah, Adam and this year’s summer interns, Maren and Florian for a job well done.
Iran Sanctions Increase Counterparty Risk
By Bruce Paulson & Ellen Lafferty, Seward & Kissel LLP
Over the last few weeks, the U.S. Government’s focus on Iran sanctions – and the nexus of that focus with the shipping industry – has dramatically increased. The U.S. Government has taken aggressive steps in enforcement of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”) – a law which was enacted on July 1, 2010 and amended and supplemented the Iran Sanctions Act of 1996. CISADA seeks to limit Iran’s development of petroleum resources and refined petroleum products and applies to both foreign and U.S. companies.
Outtakes from Ship Finance International Limited’s Investor and Analyst Event
We had the pleasure of attending Ship Finance International’s (“SFL”) first investor and analyst day, which we are certain, will not be there last based upon attendance and the evidenced interest. While the presentation should be viewed in its entirety and we encourage you to do so, we found the following points, in no particular order, of particular interest:
The Official Guide To Marine Finance Providers
Shipping Index
