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Market Timing – Sale of Primary and Secondary Shares by TAL and Insiders
The container leasing business is back on track, growing again at over a 10% CAGR after 2009, which witnessed the first decline in demand in 25 years. After a difficult 2008 to 2009, mirroring the financial crisis, when orders for new boxes were non-existent and manufacturers closed down, the container lessors are back on a spending spree. New containers are needed to meet growing demand, for fleet replacement and to meet the shortfall arising from a reduced spend by the container lines.
Connecting the Dots – Frontline to DHT
Last week, we reported on DHT Holdings Inc.’s acquisition of a 2002 built VLCC. In fact, the deal had another layer of complexity, which is not surprising given the involvement of John Fredriksen. The vessel involved was the Front Eagle, which Frontline Ltd was chartering from a German KG. To consummate the transaction, the company exercised its purchase option and simultaneously sold the vessel to DHT for $67 million, while agreeing to charter back the vessel for two years at a rate of $32,500/day. The vessel is expected to deliver and go on charter in the 2nd quarter. For Frontline, the transaction will generate $10 million in cash and will reduce its capital lease obligations by approximately $37.3 million.
Pacific Drilling’s $500 Million Private Placement
Pacific Drilling S.A. announced last week its intention to offer 50,000,000 common shares in a private placement to qualified investors. The share price is expected to range between $9.20 and $10.50, raising proceeds of approximately $500 million. The proceeds of the offering will be used to finance the Pacific Khamsin and Pacific Sharav, two new advanced capability, ultra-deepwater drillships which were contracted this month at Samsung Heavy Industries (“SHI”) for delivery in the 2nd and 3rd quarter of 2013 respectively. Similar to the four drillships previously ordered at the yard, the latest new orders are capable of drilling in water depths of 12,000 feet to a depth of 40,000 feet. The aggregate contract price for the two rigs is $1 billion, with the total cost of each vessel, including commissioning and testing and other costs, to be approximately $600 million, excluding capitalized interest.
Busy Week in the Capital Markets
Congratulations to a Whole Host of Principals and Professionals!
If there is one clear trend that is emerging in the evolution of shipping in the capital markets these days, it is the increasing role of experienced, serial issuers who control multiple companies in different market sectors. This week alone we have Ms. Frangou’s Navios on the road with a high yield bond, Mr. Fredriksen’s Golar on the road with an IPO and Mr. Georgiopoulos’ General Maritime recapitalizing its balance sheet with offerings of both debt and equity. Danaos and DryShips rounded out the week’s activities.
Skillfully blending fresh equity and debt with a generous term out of its current debt facilities, the team at General Maritime announced two transactions this week that successfully achieved the desired result; raising ample liquidity to ensure the company’s financial health with minimal dilution to its existing common shareholders. A transaction of this sensitivity, scale and complexity requires the skill and cooperation of a broad team of people.
The same can be said for any one of this week’s deals, so we would like to extend our congratulations to the key players: Nordea, DnB, Jefferies, Dahlman Rose, Citi, BoA Merrill Lynch, Morgan Stanley, Deutsche, Evercore, S. Goldman, Credit Suisse and, of course, long time General Maritime supporter Oak Tree, who all worked hard to make this one week a week to remember.
Marine Money upcoming conferences, please visit www.marinemoney.com for more details:
Houston, May 4
Istanbul, May 11
Oslo, May 26
Marine Money Week, New York City, June 21-23
A Good Week for Networking
More than 2500 guests crammed the Stamford Hilton this week for the annual CMA Shipping 2011 conference and trade show and then a couple of hundred moved on to the Capital Link investor conference at the Metropolitan Club in NYC.
The international crowd was like a who’s who in the business from owners to financiers, class and managers. The effect was a torrid pace of business development and new plans that boggled even this old timer’s view of such mega gatherings.
Mr. Fredriksen Never Sleeps –Orders HS/HE Jack-up Destined for NADL
Simultaneously with the Ship Finance sale-leaseback, John Fredriksen’s drilling entity, Seadrill Limited announced that it had reached agreement with Jurong shipyard in Singapore for the construction of an HS/HE jack-up rig of the Gusto MSC CJ70 150A design, which is similar to the Seadrill rig West Elara. The rig is projected to have a total project cost of $530 million, including project management, drilling and handling tools, spares and capitalized interest, and is scheduled to be completed at the end of the 3rd quarter 2013.
SFL Goes X-Border – Sale-leaseback with CMA-CGM
Cross-border leasing returned this week to shipping, with Ship Finance International Limited announcing that it had entered into an agreement to acquire two 2010 built 13,800 TEU container vessels, the Magellan and Corte Real, from CMA-CGM in combination with 15-year time charters back to the seller.
DHT Suspends Bond But Buys Ship
An ability to bounce back is a characteristic to be admired and DHT Holdings Inc. demonstrated that capacity this week. Having announced back on March 7th, the company’s intention to offer an unsecured bond loan in the Norwegian market, the company announced last Friday that it had decided to suspend the effort due to market conditions. It certainly comes as no surprise, due to the horrible devastation that occurred in Japan and the resulting uncertainty that followed, which had the markets behaving as a pinball machine.
Havila on Reflection
In our rush to publish, we neglected to put one and one together. In hindsight, we should have noticed and highlighted the bond’s clear resemblance to a bank loan, but with more flexibility. As we noted, the Havila bond has a tenor of 6 years, is secured by a 1st mortgage and accrues interest at NIBOR + 450 bps. But unlike the banks, Havila got better terms. Specifically, the loan to value of 73% based upon cost, and the 20 year amortization likely exceed the terms banks would offer today. And lastly, given the fact it is new construction, the first installment is not due for 9 months. We see a trend here.
A Peek Inside – Seaspan’s Piece of the Carlyle/Tiger Vehicle
With apologies to Frank Sinatra, “it was a very good year.” Seapan’s fleet continued to expand on schedule, generating improved normalized net earnings and cash available for distribution. And with the additional vessels, as well as the ones coming, the company’s cash flow will continue to improve setting the stage not only for the announced 50% dividend increase, but the adoption of a progressive dividend policy, aimed at increasing dividends in a manner that both preserves the company’s long-term financial strength and its ability to expand its fleet. This is consistent with its mantra of rewarding its shareholders while growing the company but not at the expense of the balance sheet. The company finalized its equity needs and completed the financing requirements for the balance of its newbuildings back in October and with the sale of the preferred shares, the company for the first time, in several years, has substantial growth capital. But why rest on your laurels?
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