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Navios Logistics Prices
After last night’s close, Navios South American Logistics priced its 144A offering of $200 million of 9.25% Senior Unsecured Notes due in 2019. Due to demand, the offering was upsized from $185 million. Priced in line with market talk, the notes, rated B3 by Moodys and B+ by S&P, were sold at par to yield 9.25%, a spread of 613 bps over like-term Treasuries. With the company serving storage and marine transportation markets in South America, the deal was shopped as a cross-market effort to both high yield and emerging market accounts. The notes, priced at par, gained on the break trading at either side of 101%. Today they traded at 101.5% with a YTW of 8.92%.
Seeing the Light – Golar LNG Learns From a Competitor
The MLP model is best suited for assets such as FSRUs and LNG carriers that have stable cash flows due to long-term contracts. The common units of the limited partnerships trade on yield and expected growth. Given the low interest rate environment and high demand for yield paper, the MLPs are trading at high EBITDA multiples and premiums to underlying asset value. The valuation premium gives MLPs a lower cost of capital making it an efficient way to grow and access capital.
Teekay LNG Partners Invests In the Angola LNG Project
To facilitate the acquisition of Teekay’s interest in the Angola LNG Project, Teekay LNG Partners L.P. agreed to issue 3.7 million common units at a price of $38.88 per share, a discount of 4% from the closing price just prior to the announcement. Proceeds will be used to fund the equity purchase price of Teekay Corporation’s 33% interest in the Angola LNG Project as payment becomes due while using interim and remaining funds for the repayment of outstanding debt under one of its credit facilities, which matures in August 2018. Net of assumed debt, the total equity purchase price is approximately $73 million subject to adjustment based on actual costs incurred at the time of delivery. The company will acquire the ownership interests and pay a proportionate share of the purchase price as each vessel is delivered which is anticipated to be during the fall of 2011 and in the first quarter of 2012.
Cool, Steady Heads Prevail – Genmar Restructures Liabilities
Banking on its relationship with its long-time investor, Oaktree Capital, General Maritime Corporation successfully raised $200 million in new capital, which formed the cornerstone of a restructuring of its balance sheet designed to improve liquidity largely through the reduction of its near-term debt obligations. The important side effect of the transaction was a reduction of the cash flow breakeven rate to a level commensurate with today’s weak tanker market.
Peter G was here before in the late 1990s, another weak market, but this time it was much tougher due to the large commitments resulting from the acquisition of the Metrostar fleet. As one can see from the result, this was without a doubt one difficult negotiation and we can only imagine, given Peter G’s penchant for cigars, long hours in a dark smoke-filled room. But, of course, we would have to imagine it since City ordinances prohibit smoking and Peter G gave up cigars quite a while ago. But why let facts get in the way of a good image.
Don’t Count on the Asian Banks Yet
By Rodricks Wong
In the 70’s and 80’s, US and UK banks were the prominent ship financiers, before European banks replaced them in the 90’s. But in the aftermath of the financial crisis, the lending capacity of many of these Western banks remains constrained and, since then, the shipping community has been abuzz with talk of Asian banks filling the funding gap. But how realistic are these market expectations? In this article, we define Asian banks to be Asia headquartered financial institutions that are driven by commercial interests, and export credit agencies are excluded in the discussion unless otherwise stated.
It is our opinion that Asian banks are not ready and, in many cases, lack the ambition to grow into major ship financiers. In most parts of Asia, ship finance is still at a relatively early stage of development, and Asian banks tend to have a domestic or regional focus, with little motivation to grow their shipping books substantially and fill the void left by their Western counterparts. One question we often ask financiers from Asian commercial banks is whether the financial crisis in the West has given them access to new shipping clients with whom they previously did not have a relationship, and hardly anyone would claim that they have picked up any new clients outside Asia. This might be surprising but, in reality, not many Asian banks have been actively seeking new clients, and it remains tough when it comes to convincing their credit committees to approve transactions, especially those that are without any “Asian” content.
Covenant Defaults, Reserves and Write-offs
By Jim Lawrence
It speaks volumes that the editors at Marine Money did not ask about covenant defaults in the 2007 survey. At the height of the boom, trees would grow to the sky, and vessels could be financed 100% because they’d be worth more next month.
The recent story of covenant defaults, write offs and reserve levels should not surprise any veteran of the past five years. The shift from confidence to collapse occurred rapidly. It is perhaps still too early to say for sure that confidence is returning, but the trend in terms of anticipated write offs, number of clients in default, and level of reserves are all heading in the direction of renewed health.
It was the spring of 2008, when the first whispers of banks losing trust in one another could be heard, when we asked the question: What percentage of your portfolio currently has technical covenants?
Pricing Trends
By Jim Lawrence
Hold on to your hats! Loan pricing is set to continue its past two years of steep increases, according to banks that responded to Marine Money’s 2011 Bank Survey. While basis point spreads are slightly lower according to the 2011 survey, banks are expecting the spreads their clients pay to increase by close to 100 basis points during the remainder of 2011. Of course that could be the bankers talking their book, because already spreads have come off the 2010 year highs, when 83% of bank borrowers were paying in excess of 200 basis points, 23% were paying over 300, and 4% were paying over 400. But even without any increase in the remainder of 2011, the spreads of 2006 and 2007 are distant memories.
For our survey in 2005, 200 basis points marked the highest rate we listed as a possible answer to the question: “Which of the following represents the average spread paid by your borrowers?” By 2010 we effectively started the response categories at 200 and increased the possible response amount to 400+.
The 2011 Shipping Banker Survey
By George Weltman
Introduction
“We are open for business” was the constant refrain heard publicly throughout the year from bankers, whether at a conference, a meeting, or anywhere bankers and owners congregated. This, as you might expect, was not an unconditional statement. The criteria appeared in the fine print. These included but were not limited to:
• An existing business relationship – Exposure, performance and experience do matter, particularly to senior management, while the unknown is difficult and risky.
• The relationship extends beyond lending to other services – We need to make money and lending alone just doesn’t do it, although it’s gotten better.
• A large company is preferred to a small one – Even with higher spreads, it is still a volume driven business.
• Public is generally preferred to private – Transparency and access to the capital markets provide comfort.
The Portfolios – Resilient
By George Weltman
Introduction
Perhaps one of the most difficult, but at the same time most enjoyable challenges, we undertake each year is to try to pin down the various heads of the shipping departments to open their kimonos and impart data on the size of their portfolios, along with other related statistical data. Although we are certain a number is readily available, the hesitancy to share comes most likely from our simplistic approach. We ask simply for the size of the loan portfolio. Are we asking for the right number and, if so, how is it correctly measured? Without definition and commonality, the question of whether each portfolio will be fairly portrayed on a comparative basis is a concern to respondents, as the end product could be viewed, but should not be, as a competitive “league table” of sorts.
In banking/credit parlance, the more commonly used term when discussing extended credit is exposure. This number differs in that it includes unfunded commitments, lines of credit, drawn or undrawn, letters of credit and guarantees and currency and interest rate swaps. In our number we do include unfunded commitments and lines of credit but ignore the rest. This year there was a new wrinkle. CA CIB in its submission distinguished between gross and net commitments, with the difference related to securities other than ship mortgages, which mainly consist of ECA guarantees. This bank considers its net commitments as the best measure of the bank’s ship-secured commitments. While we believe this approach has merit, we used their gross number to be consistent with the rest of the sample.
The Simple and Often Forgotten Lessons of Shipping – How to survive and prosper since 1893.
Louis Dreyfus Armateurs (“LDA”) understands that while operating a ship is, in many respects, complex, success in shipping can be achieved by following a few simple rules and avoiding the hype. With its roots dating back to 1893, LDA today operates a fleet of drybulk vessels, consisting of 7 Capesize, 1 Panamax and 14 Handysize/Supramax vessels, through its wholly owned subsidiary, Cetragpa SNC. The fleet is smaller today as the company, consistent with its counter-cyclical strategy, sold 11 bulkcarriers over the 2005/2008 period, when the market was moving towards the peak. But, while they sold their ships, Cetragpa, nevertheless, enjoyed this prosperous period by taking ships in on long time charter and fixing them out again just prior to the crisis . Where you are in the cycle has to be in the forefront of one’s thinking in shipping. A simple look at the orderbook was the only clue that the company needed to execute a perfectly timed transaction.
The Official Guide To Marine Finance Providers
Shipping Index
