As Predicted, Warrant Program a Success

Today, Navios Maritime Acquisition Corporation announced the successful completion of its warrant program. Of the total public warrants, 76.13% were exercised, exceeding the minimum threshold of 75%, thereby allowing the exercise of the private warrants. The final tally showed 19,262,006 public warrants were exercised of which 19,246,056 were exercised on a cashless basis and 15,950 were exercised by payment of the $5.65 cash exercise price.

As a result of the successful conclusion of the program, Navios Maritime Holdings (“Navios”) and Angeliki Frangou will exercise 13,835,000 of the privately issue warrants for cash. The remaining 90,000 private warrants will also be exercised of which 75,000 will be done on a cashless basis.

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Going Long – SFL Leases

As a “leasing company”, Ship Finance has a different perspective. They are in deals for the long haul, which was evident in today’s announced acquisition of three 57,000 DWT Supramax bulkers for $100.7 million. One of the vessels is on the water, having been built in 2009 with the others coming in 4Q 2010 and 1Q 2011. The vessels are encumbered with existing time charters from an investment grade Asia-based logistics company with a market cap of ~$5 billion. The charters have an average term of 9 years, with an average net charter rate of approximately $17,000 per vessel per day.
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A Specialist Investment Banking Model for Sourcing Capital and Giving Advice – Pareto Carves Out a Niche and Creates a Gateway in New York

For Pareto, it all starts with what you know and being Norwegian they are experts on industries such as shipping, oil services and E&P. In fact, their knowledge starts at the grassroots level through company and industry research and extends to asset brokerage for both ships and offshore drilling rigs. They know the players, understand industries and have global access to market intelligence. These factors together with a focused investment banking team and dedicated institutional sales force, both equity and fixed income, underlie their strength in deal origination and execution. As they say, they are “in the market” which is evidenced by three very different recent transactions. They played an important role in the Vantage Drilling bond and equity offerings and are advising Rowan on its acquisition of Skeie Drilling.
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Top Ships and DVB Bank Agree

A preliminary agreement was reached last week between Top Ships and DVB Bank pursuant to which Top Ships will receive waivers for covenant breaches through the end of 2010 and the loan related to the acquisition of the M/T Ionian Wave and M/T Hongbo, due July 30, 2010, will be restructured.

In return for a partial payment of $7.7 million, of which $3.7 million was from cash on hand and the balance from two bridge loans from unrelated third parties, DVB agreed to the repayment of the loan in quarterly installments through June 2015 and the termination of the stock pledge of approximately 12.5 million shares.
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“Progress Is Our Most Important Product” – Ridgebury Filing Amended

As an alumnus, Bob Burke can readily identify with the GE slogan referred to above as his IPO moves forward. We missed the first amendment to the Ridgebury Tanker filing earlier this month, in which the initial targeted vessels are identified. The company has entered into MOAs to acquire four identical sisters, built at Bohai Shipbuilding Heavy Industries Co. Ltd from Teekay Corporation as follows:

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Cool Reception – Navios Extends Offer

With only 38% of the outstanding public warrants tendered (2% for cash) as of the close of business Monday, Navios Maritime Acquisition Corporation announced a five day extension of the program and amended its terms to waive the condition that at least 15% of the outstanding warrants be exercised for cash. The requirement that at least 75% of the 25.3 million outstanding public warrants be exercised remains in place.

This threshold is also condition to the exercise of the warrants held by Navios Maritime Holdings (“Navios”) and Ms. Angeliki Frangou, who agreed to exercise on a cash basis a combined 13.84 million warrants with an aggregate cash exercise price of approximately $78.2 million. These proceeds together with those from the exercise of the public warrants on a cash basis were to be used to fund the acquisition of the seven VLCCs. In the event there is a cash shortfall as a result of the waiver of the 15% cash exercise condition, the parent company has agreed to provide additional financing to Navios Acquisition in the form of short-term debt priced at Navios’ average unsecured borrowing rate.
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Be Prepared – Seaspan Renews Shelf

Last week, Seaspan announced that it had filed a universal shelf registration on Form F-3 to replacing the existing one that recently expired. The new registration is intended only to provide Seaspan financial flexibility for future growth and does not reflect a change in its financing strategy. Currently, there are no specific plans to utilize the shelf to issue new securities.

As is typical of a shelf, the company will be able to offer and sell up to $1 billion of various from time to time. Seaspan will use the net proceeds from the sale of securities for capital expenditures, for repayment of indebtedness, for working capital, to make vessel acquisitions or for general corporate purposes, unless specified otherwise.

“Out damned spot! Out I say!” The Evolution of the Spot Market

Who would have thought that Shakespeare’s Lady Macbeth could have prognosticated the evolution of spot or voyage trading in the dry bulk markets? For clarification, a voyage charter is the hiring of a vessel and crew for a voyage between a load port and a discharge port. The charterer pays the vessel owner on a per-ton or lump sum basis. The owner pays the port costs (excluding stevedoring), fuel costs and crew costs. This is the way shipping has worked since the first cargo was carried and is still a mainstay of the tanker market. For a long while, the spot market took a back seat to the time charter market in the dry bulk sector, as banks and investors were more risk averse, and preferred the regular payments of a time charter. Interest in the spot market has lately revived as the public companies seek to profit from market volatility or, at the least, avoid fixing long in a low market. Today, bulkers are fixed upon indices with floors, ceilings and profit sharing. IPOs have been marketed based upon pool employment and corporate vehicles, old and new, are structured with no debt in order to play the spot market, while keeping the downside protected.
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Dry Bulk by the Numbers

By Robert Kunkel

Roller coasters have been the “must ride” attraction at amusement parks for decades. What began as a simple wagon rolling down a hill has evolved into an engineering marvel. Every major theme park across the nation has decided it is a “must have” attraction to bring in customers. They are now taller, faster and wilder with each new build bringing claims of the biggest, tallest and steepest. Some are now compared to the heights of modern Asian skyscrapers.

The description above could belong to a shipyard website. The hype reminding us of the latest round of dry bulk ship construction; Panamaxes, Supramaxes and Capesizes are now bigger, longer, and deeper.  And it seems everyone must have one, or for that matter as many of them as possible.

If roller coasters are so big, intimidating and scary, then why do we ride them? Better yet, are the current trends in dry bulk about to bestow upon us the same big, intimidating and scary ride?
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Seawell Goes Global – Seadrill Subsidiary Acquires Allis-Chalmers Energy

Last Friday, Seawell Limited, a majority (73.8%) owned subsidiary of Seadrill, announced that it had entered into a definitive merger agreement providing for the acquisition of Allis-Chalmers Energy by Seawell in a transaction valued at approximately $890 million, including assumed debt. The new company will rank in the top ten of the leading oil service companies.

With highly complimentary services, the combined oil service company will operate its Drilling and Well Services offerings with a global footprint covering more than 30 of the world’s key oil and gas regions. The combined Drilling Services offering will include platform drilling, land contract drilling, modular rigs, maintenance of drilling systems, directional drilling technology, underbalanced drilling, facility engineering services, rig and riser inspections, and oilfield rentals.  The company will be able to provide its customers with fully integrated drilling services, both onshore and offshore, with more than 4,000 experienced drilling crew members and senior directional drillers.  The Well Services offering will include electric and mechanical wireline services, production logging services, coil tubing services, ultrasonic investigation logging services, down-hole cameras, and advanced well fishing services.  Analyst estimates project that the new company would generate $1.3 billion in revenues and $195 million in EBITDA in 2010.
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