2007

Printing Money

Viewing the league tables and the numbers of Norwegian bond offerings, we were concerned about how hard working our banker friends in Norway were. We did not dare calculate how many millions they had to lend each day to come up with these numbers. Surely there couldn’t be enough Norwegian bankers to do all this. But then a deal like Mr. Fredriksen’s Sea Production Ltd. comes to market and the truth comes out. The managers of the bond offering, Pareto Securities and Nordea Bank Norge, sold the deal in less than an hour and the deal was oversubscribed approximately 14 times leaving an allocation of approximately 7% per investor. Clearly, as we mentioned last week it isn’t a tough sell when Mr. Fredriksen is involved. Still, we have to acknowledge that there was some work to be done but they sure make it look effortless. We all admire a well-oiled machine.

We briefly mentioned the deal last week and we can now fill in some details. Sea Production Ltd. is a new company established by Mr. Fredriksen to develop an FPSO business. Like the successful MLP strategy, Mr. Fredriksen sees an opportunity, warehouses it internally and then establishes a company to exploit it thereby shifting the risk while retaining upside. With the $130 million bond in place, a bank loan of up to $105 million as well as the $180 million in committed equity, Sea Production is now in a position to acquire the Front Puffin, to be delivered from the yard in July, the Crystal Ocean, currently under contract, 2 D/S Aframax vessels and Sea Production Management for $336 million.

This is only an excerpt of The Week in Review – 02/08/2007

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