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It’s All About You!
By George Weltman
This issue of Marine Money is dedicated to you. Whether you are a commercial banker, an investment banker, a lawyer, an owner or just someone who toils away getting deals done, this issue is a testament to your accomplishments in 2010.
As in prior years, we start with the same categories and await your nominations for what you think are the best deals of the year. As was evident last year, the state of the industry and the economy dictate the numbers as well as the ebb and flow of deals among the categories. As we noted in Freshly Minted, the syndicated loan market began its recovery and after a nearly 2-year hiatus the IPO returned, perhaps not in force but certainly in a noticeable way. Leasing too showed some signs of life. But by far the strongest growth in nominations was evident in the export credit and project financing categories. In the case of the former, the Chinese and Norwegian ECAs stepped up their activities to foster exports, whereas a growing Brazillian oil and gas industry accounted for growth of the latter. And, lastly, the old standbys of the capital markets, the equity follow-on offering and bonds remained consistently strong. One of our biggest disappointments was the dearth of nominations in the private equity category. We suppose that is why they call it “private.” While we know Octavian, Apollo and Alterna all made direct investments in vessels, they are keeping that information close to the vest. Likewise, Oaktree made a substantial investment in heavy-lift operator, Beluga, but remains close-lipped about it. A lack of disclosure may mean the end to this category.
The Need for Speed?
By Robert Kunkel
Having recently returned from a tanker construction project in Alabama, where NASCAR is all the rage, and listening to the industry rhetoric concerning “slow steaming”, I wondered what NASCAR racing would be like if the sponsors and team owners decided to reduce race speeds due to environmental concerns. Knock down the blurring 150 mile per hour whirlwinds to say 30 or 40 miles an hour to reduce fuel consumption and emissions. The corporate sponsors could claim environmental sustainability in NASCAR racing and Budweiser could take on a public relations safety initiative supporting the new crawl around the race track. Look at the proposal, as if the Daytona 500 took place under one constant yellow flag. It could happen. As NASCAR continues to be extremely profitable and more owners look to place additional cars on the track, the circuit will be dealing with the same problem shipping is facing in 2011 – Over-Capacity. Slowing everything down seems to be the answer to that issue.
Expanding Offshore – SFL Diversifies Its Rig Portfolio
All of Norway, including its major shareholder, is doing it so why not Ship Finance International. What is it that they are all doing? Quite simply, everyone has caught the offshore bug and is expanding their investments in that sector. And, why shouldn’t they. Oil is approaching the magical $100/barrel.
Aker Drilling’s Makeover in Three Steps
Parent company, Aker ASA, intends to recapitalize and reintroduce its subsidiary, Aker Drilling ASA, after a 3 year hiatus, to the Oslo Stock Exchange after carrying the company through the start-up phase and establishing a solid base for its future growth. In 2009, the company took delivery of two new 6th generation harsh environment UDW H6e semi-submersible drilling rigs, the Aker Spitsbergen and the Aker Barents, both of which are on long-term contracts. The Aker Spitsbergen is on contract with Statoil through July 2013, with the operator having 5×2 year options. The contract has a remaining value of $480 million over the remaining fixed term. Fixed by Det norske Oljeselskap (“DNO”), the Aker Barents is on contract through July 2014 with DNO having 1×2 year option. The remaining firm value of that contract is $730 million. With both rigs in operation, revenue of $1 million per day is generated with daily EBITDA of $600 thousand.
Equity without Dilution – Seaspan’s Mantra
Last week, we reported on the launching of Seaspan Corporation’s preferred stock issue, which priced last Friday. The company sold 10 million shares of its 9.50% Series C Cumulative Redeemable Perpetual Preferred Shares, par value $0.01 per share, liquidation preference $25.00 per share. Net proceeds to the issuer were $241,250,000. Details of the transaction are shown below in the Guts of the Deal.
Nordic WORMAR – Chemical Tanker Pool
In continuation of a joint marketing agreement begun last June, Nordic Tankers and WOMAR Logistics Pte Ltd. have agreed to establish a jointly owned independent pool management company called Nordic WOMAR. Nordic WOMAR will initially manage two pools of chemical tankers consisting of approximately 40 vessels in the 10,000 to 25,000 DWT segment.
Sale – Leaseback with a Twist
Last November, NewLead Holdings Ltd concluded a sale-leaseback transaction with Lemissoler Maritime Company W.L.L. (“Lemissoler”) which involved the sale of four dry bulk vessels, including three Capesize bulkcarriers, the Brazil (built 1995), the Australia (built 1993) and the China (built 1992) as well as the Panamax, Grand Rodisi (built 1990). Total consideration for the sale was $86.8 million, based upon a sales price of $94.3 million less the sellers’ credit of $7.5 million. The bareboat charter-back is for eight years with a step-down payment structure. For months 1-36, the charter hire for the four vessels is $1,216,000 net per month ($39,978/day) which becomes $729,600 net per month ($23,987/day) for months 37-96. For accounting purposes, the transaction is treated as a capital lease.
Preferred Shares from Seaspan
On Wednesday, Seaspan Corporation, utilizing its $1billion shelf registration, filed a preliminary prospectus supplement for a public offering of its Series C Cumulative Redeemable Perpetual Preferred Stock (“Preferred Shares”). The number of shares being offered was not disclosed; however, the liquidation preference is $25 per share. Proceeds will be used for general corporate purposes, which may include vessel acquisitions or investments. Pending the application of funds for these purposes, the company may prepay a portion of its outstanding debt under certain of its revolvers. Following the offering, Seaspan intends to file an application to list the shares on the New York Stock Exchange.
A Large Weight Lifted – Genmar Sale-leaseback
What began last quarter as an attempt by General Maritime (“Genmar”) to sell a VLCC to meet the terms of its $22.8 million bridge loan from DnB NOR and Nordea, ended this week with a sale of three unencumbered MR product tankers from the former Arlington fleet to affiliates of Northern Shipping Funds (“NSF”) with a concurrent charter-back. NSF is a leading alternative capital provider focusing on equity investments in the shipping and offshore oil service sectors.
“Re-fi”
Navios Refinances 9½% Senior Notes due 2014
On Friday, Navios Maritime Holdings Inc. and its wholly owned finance subsidiary, Navios Maritime Finance II (US) Inc. announced the offering through a private placement of $325 million of Senior Notes due 2019, in conjunction with its cash tender offer for its 9½% Senior Notes due 2014 (the “2014 Notes”). The new issue will be guaranteed by all of the subsidiaries that guarantee Navios’ existing 8 5/8% first priority ship mortgage notes due 2017. The notes were priced later that day to yield 8 1/8% and the offering upsized to $350 million.
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