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A Tale Worth Repeating
By George Weltman
Life was Simpler Then
We have a simple business. We fill empty holds with cargo and move the goods where directed. There is no cheaper alternative to moving raw materials and finished goods globally, leaving shippers at our mercy in what might be considered, in its largest sense, an oligopolistic market. But for the volatility of oil prices, our costs are relatively inexpensive. Operations with foreign crews are cheap and maintenance can always be deferred. A capital market that did not price in risk and insurers who also lost sight of risk while they sought market share. Could there be a more idyllic world?
Certainly revenues are volatile. But believing ourselves capable of timing the cycles, we order more ships in anticipation of the next cycle or a boom which we believe will never end. And like most wished for things, they come at the wrong time. The cartoon character Pogo best describes us: “We have met the enemy and it is us.”
New Sevan Successfully Places Shares
On Monday, Sevan Marine ASA announced that its offering and listing of up to 21,037,428 shares was fully subscribed. At an offering price of NOK 6.70/share gross proceeds raised were NOK 149,950,768 or approximately $25 million. Proceeds of the offering will be used for near term liquidity and general corporate purposes.
Part of the restructuring of the company, these shares were directed to former shareholders of Sevan and the unsecured bondholders who received unsecured bondholder shares in the unsecured debt conversion. This offering also provides for the listing of the directed placement of 21,047,276 new shares towards an affiliate of Teekay Corporation for NOK 141 million and the 5,261,595 new shares already issued pursuant to a conversion of the 14% Sevan Callable Senior Unsecured Bond Issue 2010/2014.
With a Little Help from Your Friends – SinOceanic Shipping ASA’s Parent Steps into the Void
Earlier in the year, SinOceanic Shipping ASA (“SINO”) announced the acquisition of three 13,100 TEU container vessels, the MSC Vega, MSC Altair and MSC Regalus together with 15-year time charters to MSC. The vessels are scheduled to be delivered from Hyundai in January, February and April 2012 respectively. The three vessels were purchased en bloc for $464.8 million, with $58 million in pre-delivery and deposit installments financed through shareholder loans from SINO’s sponsor and largest shareholder, Oceanus International Investment AS, a company owned by HNA Group Co. Limited, who is the ultimate beneficiary of a 33.33% shareholding in SINO.
Funding on Call – Navios Acquisition Taps DVB
Earlier this month, Navios struck again. Utilizing its financial prowess, the Navios team again accessed the bank market for the funding of two newbuilding LR1 product tankers, under construction at Sungdong Shipbuilding, with delivery in Q4 2012 and Q1 2013. The new term facility for up to $51 million, to be drawn in two advances, was provided by DVB Bank to Navios Maritime Acquisition Corporation.
Step One Complete – Frontline 2012 Equity Sold
In an upsized offering, Frontline 2012 Ltd concluded a private placement to a small group of large institutional investors of 100 million new shares priced at $2.85/share raising gross proceeds of $285 million in excess of the original $250 million contemplated initially. Of the shares sold, Frontline Ltd was allocated 8.71 million shares representing approximately 8.8% of Frontline 2012. Frontline’s main shareholder Hemen Holdings, controlled by John Fredriksen, was allocated 50 million shares or half the offering.
Kirby Expands & Consolidates
Last week, Kirby Corporation announced that it had acquired the coastwise tank barge fleet of Seaboats Inc. consisting of three 80,000 barrel tank barges and tug units for $42.3 million in cash. With an average age of five years, the barges, which are sisters to the four Kirby currently operates, and the tugs currently operate along the East Coast. Kirby financed the purchase by drawing down on its $250 million credit facility.
Why Own When You Can Lease – Sourcing Alternative Financing for PB Offshore I DIS
Currently circulating in the market is an interesting Norwegian silent partnership from R.S. Platou Finans involving the acquisition of an AHT under an 8.5 year bareboat hire/purchase structure and the subsequent chartering out of the vessel to Petrobras. Platou has established PB Offshore I DIS (“PB1”) with Vestland Marine S.P. z.o.o. as the disponent owner and technical manager of the project with a 10% ownership interest.
PBI has agreed to bareboat charter-in the Anglian Princess, a 16,500 bhp AHT built in 2002 in China. Owned by the JP Knight Group Ltd, the vessel has just been redelivered from a ten year contract with the UK Coastguard. With a charter-free value of $21 million, the vessel will be chartered-in “as is” by the partnership, which will undertake, together with the technical manager Vestland, the modification work necessary to comply with the Petrobras’ tender requirements. Once completed, the vessel will be delivered to Petrobras under a four option four year time charter. Petrobras intends to use the vessel for tanker offloading support
An Old Hanseatic Tradition – Komrowski and E.R. Capital to Merge
Yesterday, Komrowski Holding and E.R. Capital Holding announced their plans to merge their shipping activities. The combined company will operate 162 ships of around 9.4 million DWT, which will make it Germany’s largest shipping company in terms of fleet capacity. The combined fleet will consist of 120 containerships, 25 bulkers, 13 offshore vessels and 4 multipurpose vessels.
Transocean goes All-In Raising $1.08 billion in Equity and $2.5 billion in Debt
During the last days of November, Transocean Ltd re-jiggered its balance sheet through an equity follow-on offering and the issuance of serial bonds. First up was the follow-on offering for 26 million shares with a green shoe of a further 3.9 million shares. The offering was priced, through an accelerated bookbuilding process, at $40.50/share (based upon an exchange rate of CHF 0.9215/USD), a discount of 11.8% from the prior day’s closing price when the offering was announced. Proceeds of the share offering will be used to partially re-finance the company’s acquisition of Aker Drilling ASA, which was originally financed from cash and assumption of Aker’s outstanding debt. The replenished cash will be applied to the expected repurchase of approximately $1.7 billion of its 1.5% Series B Convertible Senior Notes due 2037 that holders may require it to re-purchase in December 2011. Barclays Capital and Credit Suisse acted as joint book-running managers of the offering.
“Breaking up Is Hard to Do” – Neither Seaspan nor Mr. Wang Wish to Part Ways
Finding a replacement for Gerry Wang is hard to do or more likely Seaspan does not want to let him go. With Mr. Wang’s employment contract set to expire on January 1, 2013, the company has asked Mr. Wang to continue in his role as Co-Chairman and CEO through March 31, 2015, when the company’s right of first refusal with GCI expires. Mr. Wang has indicated his willingness to do so and Seaspan’s board is considering what further consideration it will offer over the extended period.
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