Links
Seeing Value and Putting Cash to Work – Seaspan’s Tender
Contemporaneously, Seaspan commenced a tender offer, led by Citigroup, to purchase up to 10 million of its Class A common shares (approximately 14% of the shares issued and outstanding) at a price of $15/share, a premium of 43.5% to the prior day’s closing price of $10.45. The stock closed the next day at $12.16, an increase of 16.36%. A key condition of the offer, particularly in this period of volatility, is that there is no decrease of more than 10% in the share price or in the general level of market prices for equity securities in the main U.S. stock indices. Clearly the rich premium suggests that the board and management believe the shares to be grossly undervalued. As Gerry Wang commented, this offer “…reflects our confidence in the company’s future prospects and is an efficient way of returning capital to shareholders and increasing long-term shareholder value.” Interestingly all the directors and executive officers concur with his assessment as they have chosen not to participate. On the other hand, the contrarian might argue that the return of capital to the shareholders suggests that opportunities are for the moment scant, as the liners continue to struggle with lower volumes, pricing and overcapacity. Seaspan’s track record, however, belies that concern as they have consistently been able to raise equity and to tap new alternative sources and forms of capital as and when needed. Furthermore, the need for capital is less today due to a competitive shipyard space which can no longer demand large upfront payments deferring capital requirements into the future.
Bringing Management In-house – Seaspan to Acquire its Management Arm
Seaspan Corporation has historically and consistently focused on shareholder value and the latest two transactions are no exception. On Tuesday, Seaspan announced that it would bring its management company in house, as promised earlier, as well as launch a tender offer to purchase up to 10 million of its Class A common shares.
Seaspan has agreed to acquire Seaspan Management Services Limited in a stock-based transaction which values the management company at $54 million, subject to balance sheet adjustments and future fleet growth payments. The consideration is to be paid in the form of Class A shares valued on a per share basis equal to the VWAP for the 90 days preceding the closing of the acquisition. As part of the transaction, Seaspan will acquire and retire 100% of its outstanding Class C Common Stock held by the owners of the manager, which include a 50.05% interest owned by trusts established for the sons of Dennis Washington and a 49.95% interest controlled by Graham Porter and Gerry Wang.
Problem Solved – Out of a Bond Default Comes Offshore Accommodation IS
Marine Subsea AS defaulted on its high-yield bonds that were used to finance two state-of-the-art well-intervention vessels, which were subject to a forced sale earlier this year. Notwithstanding these problems, the company has historically been successfully involved in the accommodation barge market in West Africa creating an opportunity to restructure Marine Subsea, which was left with three offshore accommodation vessels, African Installer, African Worker and African Lifter and one semi-accommodation rig under construction. The latter was financed with two bond loans, Series I and Series II, where the former has security in the barges and the latter in the rig. The current outstanding debt under Series I and II is $295 million and $80.5 million respectively.
“The KS Market Is Without a Doubt ‘Alive and Kicking’”
This week two year-end deals came to our attention. One was a straightforward financing of a LPG carrier, while the other came out of a bond re-structuring. We begin this week with the former.
In good times and bad, the KS model always seems to work largely as a consequence of a conservative financial structure involving a bareboat charter and good investor returns. With the coming of the financial crisis, investor interest waned and the market went quiescent with this year marking its comeback.
The 3rd Quarter in Pictures
We continue our periodic look at quarterly results for a basket of shipping stocks we’ve been tracking. As in the past, we look at the percentage change in stock prices, comparing the beginning price versus the closing price for the quarter 3Q2011 and 3Q2010. We also look at the percentage change in EBITDA for 3Q2011 versus 3Q2010 and 3Q 2010 versus 3Q2009. This is our version of the proverbial crystal ball.
Watch the Clock – The Price of Bankruptcy
For the debtor, who is already overburdened with debt, it is just the beginning. Companies enter bankruptcy because they are over-leveraged, illiquid and unable to meet their existing obligations. They seek relief, but in that journey instead find a new contingent of creditors, the experts, financial advisors and lawyers, who are necessary to guide them through this re-structuring process. But the expense is not limited to their own advisors, they must also pick up the tab for their creditors, secured and unsecured. How can they possibly pay for this? The Bankruptcy Code makes it easy by providing fresh liquidity in the form of Debtor-in-Possession (“DIP”) financing, which has a super-priority over the existing secured debt obligations. With funding in place and available, “Katy bar the door”.
DVB Earns an A+
After playing grim reaper last week by downgrading 29 European banks, Standard & Poor’s raised DVB’s credit rating one notch from A to A+, with a stable outlook. This is one notch below that of parent bank DZ Bank AG. The bank has reason to be proud.
Restructuring – Continuing Progress
Global Ship Lease LTV Waiver
Last week, Global Ship Lease Inc. reached agreement with its banks to waive until November 30, 2012 the requirement to conduct loan-to-value (“LTV”) tests. Under the terms of the agreement, the ratio of outstanding borrowings under the credit facility to the charter free market value of the vessels at this time was not to exceed 75%, which could not be met. The quid pro quo for the waiver was an increase in the margin to 3.50%, a restriction on dividends and the use of cash flow to prepay borrowings under the facility. With respect to the latter, cash in excess of $20 million will be the prepayment amount in December and with payments made quarterly thereafter.
Greenfield Financing – IDB Syndicated Loan to Embraport
Last week, the Inter-American Development Bank (“IDB”) joined by commercial banks, WestLB, HSBC, Caixa Geral and Santander, closed a $430 million two tranche syndicated A/B loan to finance the construction, operation and maintenance of Empresa Brasileira de Terminais Portuários S.A. (“Embraport”), a new private mixed-use container and liquids terminal in Brazil’s Santos Port, the largest port complex in the region. Upon completion, this facility will be the largest private port in Brazil.
Reading between the Lines
Rolf Wikborg is an old and respected friend whose views on the industry are always interesting. Perhaps his latest message needs to be read between the lines. Last week, Rolf announced that he was leaving AMA Capital Partners, a firm he helped found 25 years ago, to focus on his non-shipping related family businesses, which includes hotels along the coast of Norway. Non-shipping sounds good these days. Perhaps we should consider an extended stay at his hotels through the Norwegian winter isolating us from the barrage of bad economic and shipping news.
The Official Guide To Marine Finance Providers
Shipping Index
