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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On the Road Again

On Monday, Navios Maritime Holdings (“Navios”) announced that it and, its wholly-owned finance subsidiary, Navios Maritime Finance (US) Inc. intend to offer, through a 144A private placement, $375 million of first priority ship mortgage notes due in 2017, subject to market conditions.

This marks Navios’ second entry into the high yield market having issued previously 9 1/2% Senior Notes due in 2014 in December 2006. The new notes will in fact be guaranteed by all of the subsidiaries that guarantee the existing notes, so, in fact, the new notes will be secured by first mortgages on 15 drybulk vessels aggregating approximately 1.1 million DWT.

Net proceeds will be used to repay borrowings under Navios’ existing credit facilities as well as to provide financing to complete the acquisition of two new vessels expected to be delivered in late 2009 and early 2010. Both of these vessels will then become part of the collateral package.

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Full House in Athens – Part 2

By Kevin Oates

…in the longer term shipping should correct but quality, transparency and financial strength are key to survival.

Despite the tough market and the general lack of ship finance, Marine Money’s Greek Ship Finance Forum again filled the seats in Athens.  With 310 delegates and speakers and some 40 more for the TEN Ltd lunch, there was plenty gossip and exchange of views at the 11th Annual conference held on the 8th of October 2009.

The event had started with a speaker’s dinner the previous night co-hosted by Navios Maritime Holdings and was to end in the early hours of the following morning at the Capital Party co-hosted by Capital Product Partners LP at a well-known Athens nightclub.  Even if the market is tough, we still know how to enjoy ourselves.

Back at the conference, our day began with Guy Verberne, a leading economist at Fortis Bank (Nederland) telling us that the economic recovery has come and it may well be sustainable.  China, he says, has plenty foreign reserves to prolong it’s stimulus package for as long as it needs and he sees no meaningful cutbacks from the stimulus packages of western governments, at least through 2010.  A risk is a double dip in 2011 if we get too bogged down in debt.
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Navios, Yet Again

Last week Navios Maritime Holdings announced that it had acquired two additional Capesize vessels, currently under construction at the same South Korean shipyard for delivery in the 2nd half of 2010. As it has in the past, the company purchased the vessels for a combination of bank debt, cash and mandatorily convertible preferred stock. As Ms. Frangou noted in discussing the transaction, “Using mandatorily convertible preferred stock continues to be a competitive advantage as we are able to issue equity significantly above the current market price of our common stock while engaging in transactions that are accretive to our existing shareholders. To date we have employed this financing technique to acquire six new building Capesize vessels and refinance three existing Capesize vessels.”
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Navios Uses Its Credit Again

Navios Maritime Holdings took delivery of three Capesize bulkcarriers in June and July from South Korean shipyards. Two of the vessels were financed with 10-year term facility for $120.0 million with a margin at 190 bps. The third vessel is financed with a 10-year term facility for $60.0 million with margin at 225 bps.

In addition, the company issued a $20.0 million unsecured bond due 2012 in partial payment of the purchase price due. The bond is structurally subordinated to the existing $300.0 million Senior Note outstanding and those other obligations that are guaranteed by Navios Holdings’ subsidiaries. Interest will accrue on the principal amount at the rate of 6% per annum and will be payable at maturity in July 2012 without compounding. The bonds may be prepaid by at any time without prepayment penalty.

While others try to defer or cancel newbuildings, Navios continues to meet its obligations with a twist. The company’s reputation, credibility and insured term employment enable it to obtain seller’s credit with “soft” payment terms making the transaction workable in today’s environment and a win-win for both parties.

Bright Spots

On the positive side, we can report on two deals that were announced this week.

Navios Clears Up Uncertainty
Navios Maritime Holdings shored up its balance sheet and cleared up any concerns about its ability to finance its remaining acquisitions. Despite difficult credit conditions, the company obtained $353.5 million in debt financing with favorable terms.

The financing includes:
•    10-year term financing for $120.0 million, secured at 60% of original vessel values and interest at LIBOR plus 190 bps to partially finance the acquisition of two Capesize newbuildings;
•    3-year term convertible debt for $33.5 million with a coupon of 2% and a conversion price of $11.00 per share (Wednesday’s mid-day price $2.37) to partially finance the acquisition of the Navios Vega (delivered this month); and
•    2-year revolver for $200.0 million in total, with interest at LIBOR plus 275 bps to be used for general corporate purposes.

And even with this new debt in place, Navios still has the ability to return capital to its shareholders in the form of dividends and buybacks. If by chance we had any doubts, we certainly feel vindicated in nominating Ms. Frangou and her team as dealmaker of the year.
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Not to Be Missed

Despite the difficult environment, a veritable who’s who of the shipping community descended on the Jefferies 5th Annual Shipping, Logistics & Offshore Services Conference on Tuesday and Wednesday.

We must confess that walking in at the uncivilized hour of 8 AM to a sparse crowd and seeing Jefferies Magic Eight Balls gave us pause. Was Hamish making a market statement or was he merely giving investors a new forecasting tool? Our conclusion was probably both.

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