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DVB Hosts NYC Event
Two years ago, just after the collapse of Lehman Brothers, was the last time DVB brought together their US clients. That was a sober room and except for DVB, which at the time was meeting all its goals, there was a certain anxiety in the air. At the time DVB urged its friends and clients to be sure they remained cautiously leveraged. This time in the stunning ballroom of New York’s Mandarin Oriental Hotel the words of wisdom were to be smart, to recognize that volatility is still with us and to not make dumb mistakes. This again came from a team of bankers who continue to perform themselves thanks to their clients, as they are quick to say.
But between the wise cautionary words two years ago and their own continuing success in a business they know better maybe than anyone, it would be wise to heed their counsel. Considering the thoughtful and successful crowd in attendance, we suspect it will be.
What’s In Your Model?
What do Moore Stephens, a British accounting firm with a maritime specialty, and ODS Petrodata have in common? Coincidently, they both recently took a timely look at operating costs in the shipping and offshore industries respectively reminding us of a forgotten hidden risk. Moore Stephens is renown for its annual operating survey, which benchmarks vessel-running costs. This year’s issue OpCost 2010 arrived on our desk soon after our return from our Rio conference where Tom Kellock of ODS Petrodata made, in his extensive presentation on the drilling market outlook, a couple of anecdotal comments on Transocean’s operating expenses. As shown in the enclosed slide, the 1st quarter figures, from 2007 to present, for daily cash operating expenses for a “large” fleet grew at a double-digit rate.
GE SeaCo To Top Fall Auction Action
Freshly Minted has learned from various market sources that GE SeaCo is considering a potential sale of the business. Similar sources point to Deutsche Bank getting the mandate to advise GE SeaCo on that transaction.
GE SeaCo is one of the world’s leading container lessors with a fleet of around 1 million standard and specialized containers, which they rent, lease and sell. GE SeaCo was created in 1998 by Sea Containers Ltd (since reformed as SeaCo Limited) and General Electric Capital Corporation, and is entirely self-funded. Operating as a stand-alone business, GE SeaCo has its headquarters in Barbados, with 13 sales and support offices worldwide.
Farstad Taps Norwegian Bond Market
Two weeks ago, Farstad Shipping, together with DnB NOR Markets, as arranger, concluded a NOK 500 million unsecured bond offering. With a borrowing limit of $800 million, the three-year floating rating bonds are priced at NIBOR+3.25%. Proceeds will be used for general corporate purposes. The Guts of the Deal is shown below and contains more details on the transaction.
Established in 1956 and listed on the Oslo Stock Exchange since 1988, Farstad is a major international supplier of large modern offshore service vessels to the oil and gas industry, with a focus on the high-end segment. Closely owned, the Farstad family is estimated to control between 45-50% of the company.
No Affiliate Left Behind – Navios Acquisition Prepares
While things are never quiet at Navios in general, the recent activity at Navios Maritime Acquisition may have exceeded Navios’ normal warp speed. The SPAC closed in June and then in July the company acquired Shinyo’s seven VLCCs. After taking them on, they had to be paid for. Warrants were converted and ship mortgage notes are in the process of being sold to repay the assumed bank debt.
As the curtain closes on the first act, the stage had to be set for the second. On Tuesday, the company filed a shelf registration to sell up to $500 million of common stock, preferred stock, warrants and/or debt securities.
Of the total shares outstanding of 41.9 million, only 15.8 million shares, or 37.6%, are owned by non-affiliates, suggesting that of all the alternatives equity issuance will likely be on the table front and center.
EZ Pass – Navios Maritime Partners Returns for More
On Thursday, after the market closed, Navios Maritime Partners L.P. announced and the next morning it priced it latest follow-on offering. If only everyone found it so easy. It is not simply just the fact of being public. Performance, story and reputation are also crucial and make the process smooth and simple or so it appears. The partnership has already raised $134.6 million thus far this year and with the latest offering will bring the year to date total to $231.7 million.
In this instance, Navios Maritime Partners intends to issue 5.5 million common units at a price of $17.65 per unit, a 5.1% discount from the prior close. In addition, it will offer a green shoe of 0.825 million shares. Exclusive of the green shoe, gross proceeds will be approximately $97.1 million. Upon the closing of the offering, Navios Maritime Holding will own approximately 28% interest in the partnership, after giving effect to the 2% general partnership contribution.
Fortescue Wins? Shipping Loses? Armada’s Creditors Receive a Pittance.
Declaring victory in its arbitration dispute with Armada (Singapore), Fortescue Metals Group announced that judgment was awarded in its favor in the dispute over the termination of its five-year COA with Armada in 2009. Alleging damages in excess of $70 million, Armada declined Fortescue’s settlement offer of $4 million related to the two shipments that Fortescue suspended prior to the COA termination and instead was awarded $3.7 million for these shipments. More importantly, the arbitration affirmed Fortescue’s rightful termination of the COA and as such the company will be entitled to recover its costs from Armada, which remains in bankruptcy.
Who Wants to Call the Turn?
We might. While the data may be considered slim and possibly distorted by the $6.75 billion A.P Moller-Maersk transaction, the nine-month 2010 Dealogic shipping data intimates a reversal in the downward trend in syndicated lending which began in 2007. Not only were the number of syndicated deals, volume and new money higher, club deal volume and numbers were down. The latter of course might just reflect deal size, where five of the top fifteen deals were in excess of $1 billion, but we will give the data the benefit of the doubt. In terms of specifics, the number and volume of deals for the 9-months of 2010 was 110 deals totaling $28.4 billion versus the one year earlier total of 90 deals totaling $25.9 billion. The best way to see the trend over time is to look at the data, which we show pictorially below. And, yes, you needn’t remind us that one point does not make a trend.
Speaking of Yield – Teekay LNG’s Investors Pick Up Some MoreSpeaking of Yield – Teekay LNG’s Investors Pick Up Some More
Teekay LNG Partners announced today that it had reached an agreement to acquire a 50% interest in two LNG carriers owned by Exmar for an equity purchase price of approximately $70 million, which includes approximately $7 million of working capital and other cash assets plus the assumption of $100 million in pro rata debt secured by the vessels. Exmar will retain its original 50% and continue to manage and operate the vessels. The consideration for the transaction will consist of $35 million in cash, which will be financed by drawing down on one of the partnership’s existing revolvers and the issuance of approximately 1,050,000 partnership units to Exmar ($34.5 million based upon yesterday’s closing price of $32.87).
Navios Acquisition Prices
Today, Navios Maritime Acquisition announced the company, and its wholly owned finance subsidiary, Navios Acquisition Finance (US) Inc., priced its private placement of 7-year $400 million first priority ship mortgage notes at 8.625%. The offering was upsized by $25 million, with the yield tighter than the price talk of 8.75%. The notes will be guaranteed by each of the company’s direct and indirect subsidiaries, and will be secured by first mortgages on the recently acquired six VLCCs.
This transaction highlights the conundrum of today’s investor. Depending on your market outlook, would you buy shares in a follow-on offering of an established company, an IPO, or pick up a nice 8.625% yield on your cash.
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