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Even Big Boys Get the Blues – A.P Moller-Maersk Bides Time
Market reports suggest that A.P Moller Maersk has postponed a planned EUR 1 billion bond issue due to poor market conditions. Led by Barclays, ING, J.P. Morgan, Mitsubishi and Nordea, the roadshow for the 10-year bond was to have begun on May 31 but never transpired. Analysts attribute the delay to a poor corporate bond market which is struggling with the Greek debt crisis among other issues. Following its desire to diversify its funding sources, Maersk has been a recent and regular visitor to the bond market beginning with its debut in 2009, a 750 million Euro issue. This was quickly followed by a NOK 4 billion issue and last November by a 500 million Euro 7-year issue. No worries here as the markets will certainly right themselves and in the meanwhile we are certain Maersk has sufficient liquidity to meet its needs.
More Gas – Hoegh LNG files IPO
Last week, Hoegh LNG Holdings Ltd. (“HLNG”) began the IPO process. The company intends to sell 15-25 million shares with a 10% green shoe. Using the targeted price range of NOK 38 to 54, gross proceeds of NOK 810 million to 945 million ($198-282 million) are anticipated. In Norwegian fashion, the offering will consist of an institutional offering, a retail offering in Norway and an employee offering in Norway. In order to maintain an ownership position of a minimum of 55% post-IPO and overallotment, the company’s parent, Leif Hoegh will subscribe for $20 million in the aggregate of shares. Proceeds of the offering will be used to partially finance two 170,000 cbm Floating Storage and Regasification Units (“FSRU”) which will be delivered in 4Q 2013 and 1Q 2014 at an estimated delivered cost of $550 million. In addition the company has arranged a loan to daughter company, Hoegh LNG Limited, which it will guarantee, in the amount of the lesser of $272 million or 50% of the contract price of each FSRU, plus project costs of $25 million. Financial covenants include minimum equity of $200 million, minimum combined cash of $20 million before delivery of the first vessel declining to $15 million thereafter, positive working capital at the guarantor and minimum value clause equal of not less than 135% of the outstanding. After delivery, the loan term is three years based upon a 15 year amortization to a balloon. In terms of cost, there is an upfront fee of 130 bps, a margin of 300 bps and a commitment fee equal to 40% of the margin. This is just the beginning. The company also has options for 1 + 1 + 2 additional FSRUs. More details on the offering are shown below in the Guts of the Deal.
Ocean Ness DIS
Circulating in the market last week was an invitation to invest in Ocean Ness DIS, a Norwegian “internal partnership” formed by Fearnley Finans Shipping to acquire the Ocean Ness, a 2001 built Standby/Rescue/Multi Role vessel constructed in Norway. The vessel is to be acquired from Sartor Offshore Aberdeen Ltd and bareboat chartered for 9 years to Sartor Offshore Rescue Ltd, which obligation will be guaranteed by the parent, Sartor Offshore AS, for the bareboat period. The purchase price of the vessel is NOK 117.5 million with a total project cost of NOK 123 million, which includes, in addition, an arrangement fee (NOK 1.96 Million), bank and legal fees (NOK 1.54 million) and working capital (NOK 2.00 million). Appraised by Fearnley Offshore Supply AS and Seabrokers AS, the vessel has a charter-free value of NOK 130-145 million.
Point Counterpoint
Manifestos are not our stock in trade; we tend to just read and write. Not knowing how to respond to the manifesto, we began by culling headlines from the daily Lloyd’s Intelligence over the past two weeks thinking they might provide some insights into the market. The results of this exercise yielded the following:
NOL finally joins the big ships club with 14,000 teu newbuildings
Euromar swoops for seventh boxship
Seaspan signs $700m deal for seven 10,000 teu ships
Greeks slow pace of orders in first five months
Container shipping outlook remains gloomy
CSAV pulls out of east-west box trades
Transpacific box rates tumble
Asia-Europe freight rates falling
Wan Hai and PIL to suspend Asia-Europe loop
Singapore container throughput shows 4.3% rise for first five months
Twin German ports see boom in boxes and cars
St Petersburg box volumes continue upward trend
Shippers welcome Maersk call
PierPass to raise fee to $60 per teu
World’s ports will need $830bn for infrastructure
German flag subsidy cuts to go ahead
While certainly not scientific, the following conclusions might be drawn. Supply is rising. Demand is down. Throughput is up, but that doesn’t mean it’s profitable, and costs are rising. But perhaps the most telling headline is the one that highlights the need for port expenditures, a crucial part of the logistics chain. This may well be the critical path with the manifesto having to take a back seat to gridlock. Now where exactly do we begin this discussion, which needs to be far more reaching than simply reliability of service?
Changing the Way We Think About … Manifestos
Tanks for Sale – Stolt Nielsen Acquires Stake in Marstel Terminals
Two weeks ago, we reported on Lindsay Goldberg’s investment in Odfjell’s tank terminals. This week we learned that Stolt-Nielsen agreed to acquire a majority stake in Marstel Terminals, a company which owns nine liquid bulk facilities, with a capacity of 177,000 cbm, in Australia and New Zealand. Stolt will purchase a 70% interest in the company with the founders, Graham and Anne Catley, retaining 30% of the equity and remaining as managers. According to management, the addition of these terminals will be complementary to the company’s regional tanker operations in Asia Pacific.
K-Sea Financing in Place – Kirby Taps Banks
On the last day of May, Kirby Corporation entered into a $540 million five-year unsecured floating rate term loan facility led by Wells Fargo, BofA Merrill Lynch and J.P. Morgan. Lenders include BTMU, Branch Banking & Trust Company, Compass Bank, RBS, U.S. Bank, Amegy Bank, Bank of Texas, Comerica, Keybank, Mizuho, Northern Trust and Royal Bank of Canada. Proceeds of the loan will be to provide financing for Kirby’s acquisition of K-Sea Transportation Partners L.P., with the amount drawn dependent on the final breakdown of the merger consideration between stock and cash.
Partial Spin-Off to Follow-on – Diana Container Raises Equity
Back in December, Diana Shipping Inc. spun off 80% of its 55% interest in Diana Containerships Inc. by distributing to its shareholders 2,667,066 shares. The shares began to trade on NASDAQ in January of this year.
Subsequently, on May 9th, Diana Containerships filed an F-1 registration statement for a follow-on offering of common shares. The shares closed that day at $12.64 per share. On May 31st, the company filed a press release announcing a follow-on offering of 14 million shares and a concurrent $20 million private placement of common shares to Diana Shipping. The offering, which was upsized to 14.25 million shares due to investor interest, was priced on June 10th at $7.50/share, a 27% discount from the closing price the day of the public announcement. While substantial, it needs to be put in context. On May 2nd the Dow Jones Industrial Index hit a recent high of 12,807.36, which began a steady six week market decline, its longest slump since 2002. This was certainly not a propitious moment for an equity offering. In fact from the date of filing to the date of pricing the market as measured by the DJI fell 5.8%. If in fact the window for equity offerings was open it must have been barely a crack with investors clamoring for a substantial discount given the falling market and only being receptive, in this instance, because of the good name attached to the deal.
Just Being Cautious – Genmar ATM
Last week, General Maritime Corporation entered into Open Market Sales Agreements with Jefferies & Company, Inc. and Dahlman Rose & Company LLC, to facilitate the sale of up to $50 million of its shares in the aggregate through “at-the-market offerings”. As is the case in transactions of this type, sales may be made through ordinary brokers’ transactions at market prices prevailing at the time of sale, at prices related to the prevailing market prices, or at negotiated prices. In addition, Genmar may also sell its shares to either Jefferies or Dahlman Rose, its sales agents, at a price agreed at the time. Commissions on the sale of securities are payable at the rate of 2.5% of the gross sales price of the shares sold in which such Sales Agent is a party, and are reduced to 2% in those instances where shares are sold to parties named in the sales agreement.
One is Not Enough – FSL Goes Back to Torm
Having whetted its appetite a mere week ago, First Ship Lease Trust announced today that it had acquired from a subsidiary of TORM A/S its second LR2 product carrier, purchasing the M/T TORM Marie, a sister ship to the earlier acquired TORM Margrethe, for the same $46 million. Both vessels, which have a deadweight capacity of 109,672 DWT, were built in 2006 at Dalian Shipbuilding Industry. As was the case with the first vessel, the TORM Marie will also be bareboat chartered back to TORM for 7 years, but “on slightly better terms” than the Margrethe. In its weekly report, Martin Korsvold of Pareto suggests the rate is ~$16,000/day. The bareboat is similarly structured with recourse to TORM, a purchase option at maturity, an EBO at or after five years and three one year extensions. This vessel is also expected to be delivered this month.
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