Clean Up

Also, last week, Ultragas ApS began its mandatory public tender offer, for the remaining 25.67% of the shares of Eitzen Bulk Shipping it does not own. The company is offering DKK 30.51 per share, which exceeds by more than 15% the average share price of Eitzen Bulk traded 60 days prior to the announced acquisition.

The offering document describes the acquisition as an excellent strategic fit with Ultragas’ dry bulk division, Ultrabulk, which is primarily locally focused utilizing handysize vessels on trades to and from the west coast of South America.
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From Bulk to Box

On Wednesday, Cronos Ltd, a leading container leasing and management company announced that it had received a majority equity investment from funds affiliated with Kelso & Company. As you might recall, Kelso was the keystone investor in Eagle Bulk Shipping. In addition, TCG Fund, which was previously the company’s largest shareholder, increased its equity investment.

As part of the overall transaction, Cronos has purchased additional container assets, which increased the size of its owned assets to $1 billion. Concurrently, the company entered into a new $756 million revolver, giving it further capacity to grow.
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Navios Navy Adds Battleships

Irrepressible, the navy known as Navios last week acquired through its tanker subsidiary, Navios Maritime Acquisition (“Acquisition”), a fleet of seven VLCCs from Fred Cheng’s Shinyo International Group Limited. The aggregate purchase price was $587 million and the acquisition was done as a securities purchase agreement primarily to allow for the assumption of debt. The transaction will be financed with bank debt of $453 million, representing approximately 78% of the purchase price, with cash of $123 million (21%) and through the issuance of $11 million of Acquisition’s shares to the seller. In effect, third parties are funding approximately 80% of the purchase price, a remarkable achievement these days.

The seven vessels to be acquired include six on the water and one newbuilding to be delivered in a year’s time. The fleet has an average age of 8.6 years and a remaining charter term of 8.8 years with an average charter rate of $40,440 net per day. Most importantly, the newbuilding and the recently delivered vessel, the most expensive, are chartered for 15 years. There is also upside with five of the seven charters including profit sharing.
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We Have Seen the Future And It Is Not Here

By Robert Kunkel, AMTECH

Inundated by industry reports of new marine technology describing LNG as a fuel source, optimized hull shapes to reduce fuel consumption, fuel cells providing electrical power onboard ships, or the return of sails, we are reminded that renewable energy is ready to make its maritime debut. At the recent marine Money Week conference in New York, a DNV presentation describing these advances along with the development of offshore wind technology produced a simple comment from the audience: “this is science fiction come to life.”

I stepped up to the screen to take a closer look at the artist’s drawing of the Wind Turbine Installation Vessel (“WTIV”) developed to support offshore wind projects. The new ship was being discussed in New York; however, “Made in the USA” was not stamped on the bottom of the hull.

Ironically, sustainable ocean transportation is making headlines in Europe, as the Gulf of Mexico experiences the largest environmental tragedy in U.S. history. The initial absence of technical innovation supporting the recovery efforts in Louisiana is an indication that our coastlines are years away from joining the movement into sustainable energy sources near shore or aboard ships.
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Moore Stephens Recommends Owners Support New Window for Election into Tonnage Tax

Shipping industry accounting and advisory firm, Moore Stephens has recommended U.K.shipowners collectively request that the United Kingdom grant a new window of opportunity to elect into the tonnage tax. The firm says forthcoming changes in corporate tax policy will have a large impact on owners within the corporate tax system.  Historically the UK government has granted a window of opportunity to elect into the tonnage tax system during these types of major policy transitions. However, it will only grant this window if the Chamber of Shipping proposes an adequate business case for it. The Chamber of Shipping is considering lobbying for a new tonnage tax window yet will only do so if it perceives enough support for it within the maritime community. The Chamber requests indications of interest by August 13, 2010.

Moore Stephens advises shipowners to support the window, and if the window is granted consider the long-term impact of each tax system on their business when choosing one or the other.

J.P.Morgan Predicts Tanker Sector Recovery

J.P.Morgan forecasts a tanker market recovery that should begin in the 4th Quarter of 2010 and continue through 2011. The firm reports that current low tanker stock price levels will result in favorable risk/reward outcomes for investors as the market recovers. Thus, J.P.Morgan has shifted their ratings preference to Beta. According to the firm, the companies with the highest forecasted returns are those with the most earnings leverage to spot rates, notably General Maritime and Frontline, which have been upgraded to “Overweight” ratings. Their ratings were previously Neutral and Underweight, respectively.

J.P.Morgan predicts that an increase in demand for OPEC petroleum and an increase in fleet utilization will be the likely causes for increases in tanker stock prices. Further, an expected materially active hurricane season and recent incidents in the Gulf of Mexico and Port of Dalian could also result in increased prices, yet the impact of these types of events on market prices is difficult to predict.

Personnel Changes and Notes, July 22, 2010

Navios Maritime Partners has appointed Mr. Michael Sarris to its Board of Directors July 21, 2010, upon the resignation of Efstathios Loizos. Mr. Sarris has previously held positions as Minister of Finance of the Republic of Cyprus (September 2005 – March 2008) and Director of the World Bank, an organization he has served for 29 years. He has received Bachelor and Doctoral Degrees in Economics from the London School of Economics and Wayne State University, respectively.

The Paragon Shipping Board of Directors has appointed the firm’s Chairman and Chief Financial Officer Mr. Michael Bodouroglou to also serve as Interim Chief Financial Officer. Mr. Christopher J. Thomas, prior CFO of Paragon Shipping, departed the company July 14, 2010, at which time Mr. Bodouroglou assumed the interim position. Paragon is looking for a permanent replacement for the position.

To the Well Known Publics, Go the Spoils Teekay LNG Partners L.P. (NYSE: TGP) Sells 1.7 million common units Citi Advises Investor

A sale of such pre-registered shares is frequently a case whereby a large institution approaches a company looking to buy in.  They could be looking to expand a position in a well performing security they already know and like or they could be the sort of long term focused investor every company dreams of having on board, who when they come knocking, it is good to be able to oblige.  It is just another indication that size and reputation matter, oh and being prepared. Teekay is selling these common units following a registration statement that was previously filed and declared effective by the Securities and Exchange Commission. Teekay LNG Partners announced intentions July 15, 2010 to sell approximately 1.7 million common units to an institutional investor for net proceeds of approximately $51 million. Teekay intends to use its profits from the transaction to potentially fund newbuilding deliveries and/or purchase vessels in the future. Citi was the sole advisor to the private investor on the 1.7mm ($51mm) common unit private placement.
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First Bank of Teekay

As Justin Yagerman aptly put in his piece about this deal “Teekay Tankers or Teekay Bankers?”,  providing further evidence that the reduced availability of shipping debt is affecting the cost of capital, the structure through which it is lent and, as result, who provides it, Teekay Tankers (TNK) announced this week that, in a deal structured by Deutsche Bank , it has drawn down $115m of its revolving credit facility and used the funds to provide what is effectively a first preferred ship mortgage bond secured by 2x 2010-built VLCCs owned by a Far Eastern shipowner.

So what does this deal mean? Maybe it means that TNK’s Peter Evensen, a former commercial banker at JPMorganChase and predecessors, missed the documentation of a ship mortgage loan.  More likely, what it means is that those with the combination of liquidity and flexibility the understanding that there are a lot of different ways to make money in shipping (think Denis Washington providing preferred stock to Seaspan and Seacor forming Sea Tiger) are finding that they can achieve ROCE’s that compare favorably with the historical financial performance of shipping assets, without taking market risk that is outside their commercial comfort zone.
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Execution in the Face of a Fed Fire Storm

Genco prices and upsizes despite Bernanke comments which sent market tumbling
Credit due Genco team and Deutsche led Bookrunners
Genco Shipping and Trading priced their concurrent Convertible Senior Notes and Common Stock during a day which at first saw the US equity markets trading up until Fed Chairman Bernanke threw cold water on the prospects of economic growth midday, following which the NYSE and NASDAQ suffered dramatic and swift losses.  That the Convertible Senior Note transaction was upsized during this maelstrom by 10% and the issuance of 3.125 million shares of common stock was completed just a fraction below the day’s closing price is clear indication of the markets appreciation for Genco and its acquisition of both the Bourbon and Metrostar drybulk vessels.

It is also testament to the transaction execution accomplished by Deutsche Bank Securities, as left lead, BNP Paribas Securities and Credit Suisse Securities who acted as Joint Book Running managers for the offerings.  Credit Agricole Securities, DVB Capital Markets, and Knight Capital Markets acted as co-managers for the offerings.
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