On Hold

Yesterday, Prosafe Production extended its letter of intent to sell its turret and swivel business to National Oilwell Varco (“NOV”). As a consequence of BW Offshore’s voluntary offer to acquire all the outstanding shares of Prosafe, NOV had requested the extension until after the offer had been concluded and the future ownership structure clarified.

As BWO’s offer was conditioned on the sale of that business, BWO has modified its offer accordingly. Instead of 1.2 BWO shares and NOK 5.25 in cash, the company will retain the stock component and reduce the cash portion to NOK 2 per Prosafe share. Finally, BWO is considering whether to withdraw its offer if it helps facilitate the closing of the sale of the turret business for the benefit of all shareholders.

ABS Is Back For Some

In the first intermodal container ABS term financing since 2007, TAL Advantage IV, a wholly owned subsidiary of TAL International issued $197 million Series 2010-1 Fixed Rate Secured Notes. Rated “A” by S&P, the Notes were issued at par with an annual interest rate of 5.5% have a scheduled maturity date of July 20, 2020 and a final legal maturity of July 21, 2025. The net proceeds will be used to purchase containers and for other general business purposes.

Meeting Its Obligations

In order to satisfy its obligations under the registration rights agreement, General Maritime announced yesterday that it had commenced an exchange offer to exchange up to $300 million principal amount of newly issued 12% Senior Notes due 2017 (“Series B Notes”), registered under the Securities Act of 1933 for a like principal amount of its privately placed outstanding 12% Senior Notes due 2017 sold in November 2009 (“Series B Notes”). The notes are identical in all material respects except that the Series B notes have been registered with the SEC and will not contain terms that restrict transfer or registration rights. The offer will not affect debt levels nor will the company receive any proceeds from the exchange.

Funding Opportunities

Last week, Goldenport Holdings Inc. announced a share issue by way of a “placing and open offer” to raise approximately STG 23.5 million or $35 million. The company intends to issue ~18.5 million shares at 127 pence per share, a discount of 1.55% from the prior day’s closing price. In order to demonstrate their commitment as well as to maintain their share position, Captain Paris Dragnis, the founder and CEO of Goldenport, along with certain directors have irrevocably undertaken to acquire approximately 7.5 million shares or approximately 40.7% of the offering. Seeing opportunities based upon the economic recovery and improving shipping fundamentals, the company intends to use the proceeds to fund future acquisitions. Assuming a conservative 50% leverage, the company will have at least $70 million of capacity to go shopping. Jefferies and Panmure Gordon are the joint bookrunners and underwriters with HSBC acting as Sponsor and Financial Adviser. The deal is expected to close on July 20^th.

Transformed

The shipowner, formerly known as Aries, has transformed itself and in our estimation has achieved critical mass. It may be small cap by definition but its growth trajectory is unparalleled. Since the company began the process of recapitalizing in the 4^th quarter of last year, NewLead Holdings Ltd has acquired 17 new vessels, including five newbuildings, while divesting inefficient non-core vessels and exiting the container sector. Unlike its peers, it has adopted a strategy of focusing on two diverse sectors, dry bulk and product tankers, rather than being a pure play, thereby minimizing to an extent portfolio risk.

In this week’s transaction, Newlead has signed a letter of intent with its affiliate Grandunion Inc., the private company controlled by its executives, for the dropdown of five dry bulk vessels, including 2 newbuildings, and the right of first refusal for three Korean built 81,000 DWT Kamsarmaxes, scheduled for delivery in 2013 with long-term charters attached. Total consideration for the dropdown of the five vessels is ~$148 million, which includes assumed debt and shipyard financing. The transaction is expected to close in the 3^rd quarter of 2010.

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Just Another Blockbuster

Marry opportunism with an ability to perform and the world is your oyster. Even in these uncertain times Peter G. and his team have a proven capability to perform and hence deals continue to find them. This has been the theme of the past few weeks as Genmar and Genco have made major acquisitions. Last Friday, it was Genco’s turn again and they found a willing seller in Setaf SA, a wholly owned subsidiary of Bourbon, a company, which is mainly focused on the offshore industry, although it had a dry bulk business for diversification.

Although for many it has become passé, perhaps because the world and information move so quickly, Bourbon utilizes a rolling five-year plan. In the latest iteration, “Bourbon 2015 Leadership Strategy,” the company has turned its focus to its offshore activity, which it intends to grow by further investing in innovative and cost effective vessels. By adding 80 supply vessels and 64 crewboats through a $2 billion investment plan in newbuildings, Bourbon will become a major force in the offshore sector operating a fleet of 600 vessels for deepwater and shallow water logistics services by 2015. Financing will come from the sale of its non-core fleet of 16 Supramaxes to Genco, deferred installments on the newbuildings, with 75% due upon completion, and a $400 million 12- year China EXIM Bank loan.

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Bringing It Closer to Home

Thanks to E3, a student run response effort in the event the spill reaches the East Coast, we bring the situation in the GoM closer to home. It is not a pretty picture.

No Hype. We Delivered!

Our Chairman’s promotions are sheer artistry and we constantly marvel at these masterful gems. Of course, there are issues with punctuation but why let that get in the way of a great pitch. The amazing thing is that despite his protests otherwise, he really does get it. Our problem is that he is rubbing off on us and we are moving from analytical and objective to the dark side where it’s all about the love as both Matt and he are fond of saying. In the case of this year’s Marine Money week, there is no doubt we got it right. The numbers speak for themselves. This year we went out on a limb denoting the theme as the Comeback or Confidence Returns to Ship Finance. Whether or not that was the case and we believe it is, 1,078 registered guest wanted to hear the answer. This was a new record surpassing 2008’s 1042 guests. Uncertainty + optimism trump a boom.

We relish the awards afternoon. We devote a great deal of energy, although far less than the dealmakers themselves, in choosing the transactions from the many submissions we receive and it is a pleasure to see the winners bask in the recognition they rightfully deserve. It is also educational as the latest structures and ideas are on display for all to see and take advantage of as appropriate. Nigel Thomas and Dan Rodgers of Watson, Farlay & Williams did a masterful job moderating the session which included presentations by Sheldon Goldman, Efthymios Bouloutas of Marfin, Ronny Bjornadal of Nordea, Sean Durkin of NSF, Gerrit Parker of Citi and Craig Fuehrer of Deutsche Bank.
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Appetizer

Being somewhat disloyal to the team, we shirked our set-up responsibilities for Marine Money Week and snuck off to participate in Morgan Stanley’s 3rd Annual Shipping Conference, with its superb cast, for part of the morning. Wiley Griffiths set the stage by asking questions, which he hoped by the end of the day, would be answered. Where are we in the cycle? Where will investors find returns? He noted that banks were making loans selectively and the return of bonds and IPOs. But volatility remains a concern. He termed this a period of uncertainty, however there is a sense of optimism as fundamentals remain positive. Then there is the old standby saw intimating hope: no news is good news.

Ole Slorer then took the stage to introduce the master of PowerPoint, who also happens to be President and CEO of OSG, Morten Arntzen. Mr. Arntzen as always was right on point and this time provided an encore to Barbara Streisand’s The Way We Were, previewed at our Hamburg conference, with Bob Dylan singing The Times They Are a Changin’. While both were entertaining, they made very serious points. The lyrics of the former were a reminder that the banking world had changed and there is no turning back. The latter was a reference to the Deepwater Horizon intimating again that our world was going to change as a result and much quicker than anyone expects. Whereas in the past he conceded to requests to remove the technical management slide from the deck that would no longer be the case. Investors and lenders need to focus on the technical capabilities of the companies they invest in for to do otherwise is suicidal.
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Wedding Season or Offshore Consolidation Takes Two Giant Steps

Monday was a big day in the offshore sector with two major transactions announced. First BW Offshore (“BWO”) made a voluntary exchange offer for all of the shares of Prosafe Production Public Limited it does not currently own. The company is offering 1.2 BWO shares and NOK 5.25 in cash for each share, which consideration equates to NOK 16.21 based upon Friday’s closing price, valuing Prosafe at approximately NOK 4.1 billion or a 17% premium to Prosafe’s closing price on Friday. BWO currently owns directly or indirectly 23.88% of the total outstanding shares with a wholly owned subsidiary owning a further 6.1%. Presently BW Group owns 66.95% of the total number of shares in BWO and will be diluted to approximately 47% to 49% shareholding in the combined company based upon an acceptance level of between 90% and 100%. The combination will create an FPSO company with the diversification, presence, resources and competence to meet the increasing requirements from both clients and regulators.

BWO will finance the cash consideration from available credit facilities. In connection with the offer BWO has established a new bridging credit facility of $1.1 billion from BW Group on competitive terms with expiry in November 2011. The new facility together with the availability under the existing credit facility of $1.5 billion will be sufficient to finance the entire cash consideration and refinance Prosafe’s existing credit facilities, while providing capacity for growth.
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