Convertible Market Opens to Shipping

In remarkably similar deals, first OMI and then Seacor used that form of exotic financing that has so long stayed on the perimeter of shipping finance: the convertible bond.

OMI (NYSE: OMM) was able to capture and monetize the value of its stock’s volatility when it sold $250 million of 2.875% convertible unsecured notes due 2024 through sole Bookrunner Jefferies & Company on the 29th of November. Each $1000 face amount bond comes with the right to convert into the value of 32.5 shares of common stock, or $30.70, a premium of about 46.5% at the time of the deal. OMI stock’s 42% price volatility over the past 100 days undoubtedly contributed to the deal’s superior pricing.

One week later, diversified offshore services company Seacor (NYSE: CKH) priced its third convertible issue since going public through Credit Suisse First Boston (the company’s last convertible issue was in 1996). The $250 million in notes, inclusive of the $50 million greenshoe, also bears interest at a fixed rate of 2.875% and matures in 2024. Each $1000 in principal will be convertible into 13.6705 shares of the company’s common stock, representing a substantial but slightly less impressive 40% premium to the price of Seacor’s stock when the deal closed. The first call dates for both deals will be in 2011, with repurchasing prices being 100% of the principal amount of the notes plus accrued and unpaid interest.

This is only an excerpt of Convertible Market Opens to Shipping

Content is restricted to subscribers. To continue reading please Log-In or view our subscription options.