Easy Decision

With the choice to lend commercially, where one is exposed to the risk of the borrower defaulting, or a “risk-free” loan, which would you do these days if you were a bank? Stephen Antczak and Jung Lee of Cantor Fitzgerald explained in their recent report titled “Capital Structure Insights: It’s All About Consistency” why banks may have little interest or incentive in lending commercially at this juncture.
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Not To Be Left Behind

Last week, Paragon Shipping Inc. filed a shelf registration to sell up to $500 million of various equity and debt securities. In addition, the company registered 9,214,206 shares to be sold in a secondary offering. These shares are controlled by affiliates of Mr. Michael Bodouroglou, the company’s chairman and chief executive officer. Proceeds, excluding the secondary shares, may be used to make vessel acquisitions and capital expenditures, debt repayment, working capital and general corporate purposes.

Paying the Bill

On Tuesday, after the market closed, Aegean Marine Petroleum Network announced that it would utilize its recently effective shelf registration to issue 3,906,000 shares of its common stock in an underwritten public offering. The closing price of the shares was $32.45, which would equate to an equity raise of approximately $126 million on a gross basis. The next day, in a market roiled by news of restricted lending in China, the shares traded up $0.23 to $32.72.
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Structuring Upside while Minimizing the Downside

Last week, Diana Shipping announced its intention to co-invest in a new company expected to invest in containerships over the next 12 to 18 months. Diana intends to invest $50 million for a minority stake, with the balance, as yet undisclosed, being raised in a private offering to institutional and accredited investors. Diana would further benefit from providing administrative and vessel management.
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Blowout!

As a seasoned issuer, Teekay Corporation wasted no in pricing what was expected to be $300 million of senior unsecured notes due in 2020. On Friday, not only did they announce highly competitive pricing, but also that the offering had been upsized by 50% to $450 million.

With a coupon of 8.5%, the deal was priced at 99.181% to yield 8.625% or 492 bps over like term Treasuries. Details of the transaction are shown in the Guts of the Deal below.

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The World Tilts East

Dealogic issued the full year league tables for 2009 this week and there were few surprises. Volumes were down as one would have expected and there was a certain Asian flavor to the leaders.

Perennial leaders DnB NOR and Nordea were supplanted by Mitsubishi UFJ Financial Group, which took the number one spot in both the Bookrunner and Mandated Lead Arranger tables. This strong showing was based upon their strong relationship with NYK Lines, for whom they were the sole arranger on two deals totaling $2.5 billion and their lead position on the largest deal of the year, AP Moller-Maersk’s $6.5 billion transaction. Don’t cry for the Norwegians. DnB NOR held its own, finishing in 2nd place in both league tables. Their finish was largely determined by transaction size as the number of transactions were comparable. Nordea slipped to 5th in the bookrunner table but finished third behind DnB in the all-important MLA table.
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Don’t Forget Follow-ons

We hear word that Maxim Group is the lead underwriter for a $30 million secondary offering for Seanergy Maritime Holdings. Victor Restis is expected to put in $5 million. The deal goes to market the week of the 24th.

Swap to Extend

On Tuesday, Teekay Corporation announced a cash tender offer for all of its outstanding 8.875% Senior Notes due 2011. As of December 31, 2009, $176.6 million aggregate principal amount of these notes were outstanding. The total consideration for the tender offer will be $1,078 per $1,000 principal amount, consisting of a tender offer premium of $60 and a consent payment of $18 for early tenders. The offer, managed by J.P. Morgan, is scheduled to expire February 9th.
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Helping Out the Banks

In his recent sector report, John Parker of Jefferies highlighted a trend that began last year and continues today. Borrowers continue to replace bank debt with a combination of bank debt and high yield bonds. With these transactions, the banks benefit from reduced exposure, higher pricing and fees, while borrowers meet their liquidity needs albeit at a cost. High yield, as we have preached, is now becoming a staple of the balance sheet.

In the latest iteration, Marquette Transportation Company offered $250 million of senior secured notes due in 2017. Rated B3/B-, the notes which bear a coupon of 10.875% are priced at 98.81% to yield 11.125% (equating to a spread of T + 795 bps) slightly under the price talk of 11.25%. The pricing was superior to that offered to American Commercial Lines (B2/B+) in a similar deal done this summer. Those notes were priced to with a YTW of 13.5% (T + 1,013 bps), although they are currently trading at 104% with a YTW of 11.5% (STW 869 bps).  The notes will be secured by a 2nd lien on all of the issuers’ and guarantors’ assets that will secure a new credit facility described below. Details of the transaction are provided in the Guts of the Deal.
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Transparency Rules

CMA CGM announced last month that it had come to terms with its banks, which have provided, as an intermediate step, a credit line of $500 million. This will allow the company to continue its restructuring efforts, which involves the restructuring of its debts, raising new equity and the cancellation or postponement of newbuildings currently on order in Korean shipyards.
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