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Navios Family Investor Day
Four companies represented in 83 slides were on view to a packed room of over 100 investors all interested in hearing the Navios’ story from the management team, which shared the duties. Not only has management got their presentation down to a science, they keep getting better. Clearly, it worked well with the entire presentation completed in just over an hour and with few questions asked at the end.
A comment by Ted Petrone summed up the day for us. “We can’t control the market, but we can control costs and manage risks.” Nor, unfortunately, can they control the share price, much to their dismay, but that should hopefully take care of itself based upon management’s efforts and a hoped for market turn.
How Do You Measure Success? – DVB Reports a Strong Nine Months
In banker “speak”, it was a good nine months for DVB Bank SE. Total assets rose by 7.3% to €20.7 billion as the nominal volume of customer lending grew 2.1% in Euro terms to €19.6 billion or, more relevantly, 2.7% in dollar terms to $26.3 billion. In more prosaic terms, new business totaled 109 transactions with an aggregate volume of €3.3 billion, versus the year earlier result of 93 deals with a volume of €3 billion. Unfortunately, due to higher funding costs and a strategic focus on better credits, the average interest margin declined from 322 to 297 basis points.
Not so impressive, however, were the 3.1% decline in ROE to 13.8% and a 2.9% increase in the cost/income ratio to 51.1%. From the balance sheet perspective, tier 1 capital, calculated in accordance with Basel II, rose to 19.3%, a positive these days.
Going Dark – B+H and U-Sea Bulk Seek Privacy
Reflecting the lack of interest in its shares, B+H Ocean Carriers Ltd. announced his week that its shareholders had approved a 101 for 1 reverse stock split and the decision to delist the shares from the Amex. The latter step will generate substantial savings, estimated to be in the range of 20% of G&A, as the company will soon discontinue it filings with the SEC. After the de-listing the shares will be tradable on the over-the-counter market. We will miss the B+H brand which dates back to our entry in the business in the early 1980s.
CECO Too Undertakes Balance Sheet Repair
In its agenda for its EGM scheduled for December 9th, Camillo Eitzen & Co. ASA, has outlined the steps the shareholders have to approve in order for the company to move forward with a rights issue or the conversion of debt into equity. While the company has sufficient liquidity, if the market value of the company’s remaining shareholding in Eitzen Chemcial, Eitzen Maritime Services and Solvang are included, the equity is lost. In order to position the company for the equity infusion, share capital will have to be reduced to reflect the actual equity of the company through a reduction of the shares nominal value. In addition, to meet the minimum requirements of listing on the Oslo Stock Exchange, management is proposing a 10 for one reverse split of the shares. And, lastly, the company’s shareholders will be asked to approve the change of the company’s name to Jason Shipping ASA. Once approved, the company can take the next steps to improve its equity position.
All Options Considered – TORM Re-groups
The market situation has not improved and TORM A/S optimistically viewing improving prospects in the future now needs to position itself to get there. To that end, it has postponed the previously announced $100 million equity rights issue, as inadequate, and “…decided to review its capital structure with the intent of establishing a more long-term financing structure.” To that end, the company is working with its banks to amend and extend its debt repayment schedule and expects to engage in a rights issue of up to $300 million as part of the comprehensive financing plan. Of course, with respect to the latter, the crucial question is whether majority shareholder, Mr. Villy Panayotides, will step up for his proportionate share. No stone will be unturned and the company intends to dig deeper into its operations to find new cost and cash improving initiatives with a cumulative impact of a minimum of $100 million over the next three years.
Working for the Government – Eksportfinans Unwinds
Heresy! Despite adherents’ strong belief in capitalism, it was the private solution that failed this time. Eksportfinans ASA, the operator of Norway’s 108-scheme (subsidized fixed interest CIRR loans), was caught by the EU’s Capital Requirement Directive that limits large exposures. In order to comply with the requirements, the company needed to be re-capitalized or required a permanent exemption from that rule. Unfortunately, Eksportfinans and its largest shareholders, DNB Bank (40.0%), Nordea Bank (23.21%), the Kingdom of Norway (15.0%), and Danske Bank (8.09%) could not come to terms on a plan for re-capitalization that would ensure adequate export financing and the government deemed a waiver unlikely.
As a consequence, the government took over the 108-agreement lending scheme, which represents 70% of the loan book, from Eksportfinans, which it intends to replace with a state-funded scheme for export credit financing which will be administered by a government agency. Initially, the government intends to establish an interim financing scheme, managed on behalf of the government by Eksportfinans, with an initial funding of NOK 30 billion, until the permanent scheme is operational, which is expected to be no later than July 1, 2012. During this period, new commitments for CIRR loans will be granted by Eksportfinans, as administrator, with the assets and commitments to be taken over by the newly established agency.
Scorpio’s Opportunistic Equity Funding
Utilizing its earlier $500 million existing shelf registration, Scorpio Tankers, Inc. announced yesterday a follow-on offering of 7 million shares, with Morgan Stanley acting as sole book-running manager and Fearnley Fonds ASA as co-manager. The shares closed that night at $6.66 and were priced today at $5.50/share, a discount of 17.4%, raising gross proceeds of $38.5 million. A member of the insider Lolli-Ghetti family was allocated 700 thousand of the shares.
Proceeds of the offering will initially be used to partially repay outstanding indebtedness under the company’s 2010 revolving credit facility with Nordea and for general corporate purposes. The company then intends to re-draw all or a portion of the amount available under the revolver to fund the acquisition of two 52,000 DWT newbuildings that it is currently negotiating to have constructed at South Korea’s Hyundai Mipo Dockyard.
Financing Newbuild Program #5 – Hornbeck Taps Equity Markets
On November 7th, Hornbeck Offshore Services Inc. announced its plans to build 16 U.S. flagged 300 class DP2 new generation offshore supply vessels, with options to build a further 16 for its upstream business. Exclusive of construction period interest, the aggregate cost of the first 16 vessels is estimated to be $720 million with deliveries scheduled during 2013 and 2014, which coincides with the delivery of approximately 145 incremental floaters and high specification jack-up rigs. The order was split equally between VT Halter Marine and Eastern Shipbuilding Group. This newbuilding program is the company’s eighth since its inception in 1997 and the fifth involving state of the art technologically advanced new generation OSVs.
Constructed with the increased demands of its deepwater and ultra-deepwater customers in mind, the new design offers double the deadweight capacity and more than doubles the liquid mud capacity of its predecessor 240 class, while maintaining an overall size that maximizes the efficiency from an operating cost perspective. While the vessels will be built in the U.S. which qualifies them for the coastwise trade in the Gulf of Mexico (“GoM”) under the Jones Act, the vessels will be deployed in the company’s core geographic markets of the GoM, Brazil and Mexico.
For Visibility & Liquidity, Pacific Drilling Comes to NY
On November 7th, Pacific Drilling S.A., a company controlled by the Ofer family through Quantum Pacific Group, announced an initial public offering of six million of its shares, which will be traded on the New York Stock Exchange. Previously in April 2011, the company completed an offering of 60 million shares to qualified international and U.S. investors In accordance with Regulations S and D under the Securities Act of 1933. These shares currently trade on the Norwegian OTC List. Following the completion of the IPO, 41.85 million of these shares sold pursuant to Regulation S may be re-sold immediately in the U.S. market creating a substantial overhang. Post-offering, Quantum Pacific will own 150 million shares representing 69.4% of the total outstanding shares.
GGS Bond Starts a Resurgence of Capital Raising
A recurring theme of this year is the ease with which the offshore sector can raise capital even in this difficult market. The last two weeks have been no exception. During the first week of November, Petroleum Geo-Services ASA announced an offering of $300 million senior unsecured notes due in 2018, which would be guaranteed on a senior basis by certain of the company’s subsidiaries. The notes were priced a week later with a coupon of 7.375% and issued at 98.638% to yield 7.477%. Proceeds will be used for general corporate purposes and may include the re-purchase of the outstanding principal amount of its existing convertible notes. With little disclosure from the company, we were only able to learn that Barclays led the deal and DnB NOR Markets was one of the co-managers on the transaction.
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