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At Long Last, the Spin-off (Partial and Private) of Ocean Rig
After announcing the successful completion of its $350 million ATM offering on Friday, DryShips announced that its wholly owned subsidiary, Ocean Rig UDW, intends to offer through a private placement approximately $500 million worth of Ocean Rig’s common shares in exchange for a 20% to 22% stake. The transaction has an extremely short time-line with the deal expected to close this month. The offering will be made to Norwegian private investors, and other qualified investors outside of the U.S. In addition there will be a concurrent private placement in the U.S. under 144A to qualified institutional buyers. Nevertheless, based upon the choice of managers, DnB NOR, Fearnley Fonds and Pareto, and the tight time frame, we expect the focus to largely be in Norway, where the “offshore” is part of investors’ DNA. The net proceeds of the offering are expected to be used to finance the construction costs of the four drillships under construction in Samsung, to exercise the recently announced options to construct a further four UDW drillships, and general corporate purposes.
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TOO Follows-on Again
Once again utilizing its $750 million shelf registration, Teekay Offshore, on the heels of its August follow-on offering of 5.25 million shares, last week offered to the public a further 5.6 million common units. The units were priced at $28.74, a 4.4% discount to Thursday’s closing price of $29.11. A green shoe of 840 thousand shares has been offered to the underwriters. Proceeds will be used for general partnership purposes, including the acquisition of dropdowns from parent, Teekay. In the interim the partnership expects to use the proceeds to pay down a portion of its outstanding debt under various revolving credit facilities. More details are provided in out Guts of the Deal below.
It’s Cold Outside, But the Money Is Hot – A Walk Around Another Financial Center
It is a very short walk between Aker Brygge, Haakon VII’s Gate and Dronning Mauds Gate. Yet the compactness of the area should not dissuade you of the importance of this area. With one noticeable exception, Nordea Bank, it is the center of ship finance in Norway and Nordea has solved the problem of being an outsider by establishing unofficial satellite offices in the Theatercafeen and Dagligstuen depending on the time of day. By definition, Oslo is the center of the Norwegian bond market which lately seems to be single handedly financing the offshore business, but just as importantly it is home to two major Western shipping banks, the previously mentioned Nordea Bank and DnB NOR who more often than not lead the syndicated loan league tables, in addition to having leading capital market roles.
Welcome Aboard GLBS
Last week, Globus Maritime Limited announced that it had redomiciled from Jersey into the Marshall Islands, delisted its shares from AIM and began trading on the NASDAQ on November 26th. While we captured the transition in a single sentence, in fact it took lots of work. This may well begin the exodus by other shipping companies from the AIM, which has not worked as well as expected.
Mr. Economou’s Successful Week
The week started with news that Ocean Rig UDW, a wholly owned subsidiary of DryShips, entered into a two well contract with Borders & Southern Petroleum for two exploratory wells offshore the Falkland Islands. The contract, which is valued at $77 million, commences in 4Q 2011, upon expiry of the current contract and is expected to last 90 days. There are options for a further three wells which could extend the contract by 135 days.
Stolt-Nielsen Gas Joins Forces with Sungas
Last week, Stolt-Nielsen Gas Ltd. (“SNGL”) reached an agreement with Sungas Holdings Ltd. whereby the latter will become a 50% shareholder in Avance Gas Holdings, with SNGL retaining the other 50%. Under the terms of the agreement, Avance Gas will acquire three VLGCs from Sungas, for which it will receive the 50% stake as well as an undisclosed amount of cash. The three VLGCs of 83,000 cbm were built in Daewoo in 2008. In addition, to these three vessels, Avance’s fleet will consist of one owned vessel, the 2003 built Stolt Avance of 82,200 cbm, another VLGC, which it operates and a chartered-in medium sized gas carrier. Financing will be provided through shareholder loans until external bank financing can be secured. Advised by Lazard, Sungas is controlled by a private Saudi Arabian investor.
DVB’s Schiffspfandbrief
On Monday, DVB announced that its first ship covered bond issue or Schiffspfandbrief was successfully placed last week by joint lead managers, DZ Bank and Deutsche Bank. The bank issued EUR 250 million of three year 2.25% bonds, which were sold at 99.702%, equivalent to a spread of 50 bps over mid-swaps. The bond is collateralized by a pool of 56 eligible shipping loans, secured by first mortgages, of approximately $1.01 billion in principal amount representing a cross-section of DVB’s shipping portfolio. The cover pool consisted mainly of product tankers (21%), bulk carriers (18%), crude tankers (18%) and containerships (15%). The bonds were rated Aa3 by Moody’s. Purchasers, solely banks, placed 56 individual orders, with 90% placed in Germany and the balance in Austria and Luxembourg. By choosing this refinancing vehicle DVB has expanded its investor base and funding sources, which these days is a good thing.
APM Goes Back to the Bond Market
Having had its first taste last year, A.P. Moller-Maersk (“APM”) returned to the public bond market a couple of weeks ago, issuing EUR 500 million of 7-year bonds with a coupon of 4.375%. The net proceeds will be used for general corporate purposes. Unsurprisingly, investor interest was strong with the bonds being more than three times oversubscribed. As a point of comparison, last year’s issue of EUR 750 million 5-year bonds carried a coupon of 4.875%. Placed by Barclays Capital, BNP Paribas, Danske Bank, HSBC and RBS, the bonds will be listed on the Luxembourg Stock Exchange.
Erin Go Bragh – “Irish Troubles” Impact SFL
These days this Gaelic expression takes on even greater meaning. In its Anglicized version, it means Ireland forever, however “bragh” is more often literally translated to mean “until doomsday”. While we remain certain Ireland is here forever, it would appear that economically it was pushing the latter boundary. But what does that have to do with ship finance? Quite simply the latest offering of bonds by Ship Finance International experienced the fallout of the latest “Irish Troubles.”
Talk of the Town – A Market View
While in Oslo the week before last, the deal on everyone’s lips was the Golden Close Maritime Corp.’s $460 million senior secured bond offering to finance the Deepsea Metro I, a drillship capable of drilling in water depths of 10,000 feet. Scheduled for delivery on May 2011, the vessel is being constructed in Hyundai Heavy Industries at a contract price of $668.39 million with an all-in delivered cost of approximately $800 million.
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