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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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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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George Jumps into a Convertible
DryShips announced on Tuesday that it intends to offer $300 million aggregate principal amount of convertible senior notes under its previously filed shelf registration. In addition, the underwriter will be granted an option to purchase up to an additional amount of $45 million of the notes to cover over-allotments. Proceeds of the notes will be used for vessel acquisitions, working capital and general corporate purposes.
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All Eyes Are On Genmar
We know that General Maritime’s dynamic duo, Messrs Georgiopoulos and Pribor are on the road marketing their $300 million senior unsecured notes offering due in 2017 and so, while they are busy selling we thought we would take a read of the high yield market.
Earlier this week, Navios Maritime Holdings closed its successful $400 million private offering of first priority ship mortgage notes due in 2017. Rated BB-/Ba3, the coupon on the notes was 8.875% and was priced to yield 9.125%. The company escrowed $105 million of the proceeds to provide additional financing to complete the purchase of two new vessels with the balance used to repay existing credit facilities.
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Back in the Saddle
After what we perceived to be a long absence, we were pleased to see the return of Justin Yagerman at his new desk in Deutsche Bank. Mr. Yagerman leads the transportation and shipping team that includes Robert Salmon and Michael Webber. Coverage includes trucking, airfreight, logistics, railroads and, of course shipping.
On Wednesday, Mr. Yagerman initiated coverage of the sector. His main takeaway on shipping was: “near-term fundamentals challenging across the board, but high quality names should continue to outperform.”
Pipavav Shipyard
This week, we are impressed to see another shipyard finding success in the IPO market. This makes India’s Pipavav Shipyard the third successful shipbuilder to raise equity following Taiwan’s China Shipbuilding Corporation and Malaysia’s TAS Offshore since the beginning of this year.
Pipavav Shipyard will soon be listed on the Bombay Stock Exchange and National Stock Exchange upon the completion of its book building. The private shipyard has offered its shares at a price band of Rs 55 – 60 a piece and plans to raise between Rs 4.7 billion (USD 98 million) and Rs 510 billion (USD 106 million). This amount is significantly lesser than the USD 200 million it had previously planned when the shipyard registered its IPO during the first quarter of 2008. Out of the 85.45 million shares on offer, 2.6 million shares have been set aside for the employees. We have provided a summary of the transaction in the Guts of the Deal table that follows. JM Financial Consultants, Citigroup Global Markets India, Enam Securities and SBI Capital Markets are the appointed bookrunners for this IPO. Continue Reading
One Step Forward One Step Backward and One Tentative Step….
Danaos Corporation reported this week that it had now obtained waivers from all its lenders covering all the prior breaches of financial covenants in its credit facilities as well as any subsequent breaches until October 1st 2010.
Less positive was the news that Zim Integrated Shipping Services stated that it is reducing unilaterally all of its long-term charter payments by 35% commencing September 1st for a period of 3 years. Danaos, which has 6 vessels on charter to Zim for 12-year periods, has not accepted this condition nor has it acquiesced to this reduction. The company is currently in discussions with Zim and is evaluating the situation.
A Bellwether?
The bond market is getting better. As we saw with the Hornbeck bond last month, spreads and trends are improving. The economy seems to be bottoming out and with an improving economy and inflation fears increasing interest rates should follow. The timing for an offering seemed propitious then as it does now.
It was therefore no surprise that Seacor Holdings Inc. (“Seacor”) became one of the first NY-listed “shipping” companies to issue bonds this week when it priced and sold $250 million of 7.375% Senior Notes due in 2019. The issue was priced at 99.239% to yield 7.471%, reflective of the current market and at a much better rate then would have been achievable 6 months ago. This equates to 400 bps spread over like term Treasuries. The issue was well received and several times oversubscribed and despite requests to upsize the deal, Seacor was satisfied at the current level.
On the Road?
Last Thursday, Danaos Corporation filed an F-1 registration statement for a follow-on offering. Unlike prior equity deals, there was no press release or announcement of any kind and the statement itself lacked detail. Subsequent to the filing, there has been no further public disclosure.
What we do know is that Deutsche Bank, Citi and Credit Suisse are the joint bookrunning managers for the offering. Proceeds are expected to be used to fund a portion of the newbuilding program and for general corporate purposes.
We suspect that despite the lack of public disclosure, there is a whirlwind of activity behind the scenes as the company and its bankers take to the road. Clearly, if there was a company that needs capital, this is it. Unfortunately, Danaos faces two problems from a marketing perspective. The container market is in the worst state it has ever been in. Also, insiders hold 80% of the shares with little float suggesting the company is neither well-known nor widely held by institutions who would likely be the main buyers of the shares.
Expanded Distribution via Strategic Alliance
Last week, Deutsche Bank (“DB”) announced an agreement with Fidelity Investments allowing Fidelity’s retail and institutional brokerage clients the opportunity to participate in initial public offerings and follow-on equity offerings underwritten by Deutsche Bank. This exclusive relationship represents a significant development for DB’s US equity platform by expanding its retail investor footprint while complementing the existing distribution capabilities of DB’s highly effective Private Wealth Management division which targets high net worth clients.
The alliance with Fidelity, substantially expands DB’s access to an investor base comprising Fidelity’s retail brokerage customers, customer accounts managed by Fidelity’s registered investment advisors, correspondent broker/dealer and other institutional clients.
This venture will integrate into DB’s equities platform enabling it to receive retail indications of interest immediately after a deal is launched.
The company views this new relationship with Fidelity as a great franchise building opportunity.
The Official Guide To Marine Finance Providers
