The Royal Bank of Scotland has demonstrated its creativity and competence once again in the completion of an $800 million UK operating lease, the first of its kind, to finance four LNG carriers. The lease has a relatively short term, compared to standard 25-year leases, and comes as the UK government threatens rule changes that would put disallow commonly-used arrangements. RBS served as lead arranger of the deal and is the sole lessor, while financing has been syndicated down to BNP, Societe General, KfW and National Australia Bank.

Alfa Capital Partners today announced the final closing and relaunch of The Great Circle Fund LP, a $180 million private equity fund created to invest in maritime transportation, infrastructure and logistics in emerging markets, primarily in Russia, Ukraine, the other countries in the Former Soviet Union, southeastern Europe, the Balkans, Turkey and other parts of the Mediterranean. OPIC, Great Circle Capital, Alfa Capital Partners, and Probel Capital Management are partners in the deal, which helps to illustrate the long-term commitment to foreign direct investment in Russia – including Russian shipping – that exists.

It was also announced this week that Russian tanker heavyweight Novoship bought out the 17.45% stake of minority shareholder Akropol for around US$146 million, through Liberian-registered Intrigue Shipping. Brunswick UBS analysts led by Dmitry Vinogradov have suggested in the past that Novoship has both high quality assets and superior growth prospects but that the company lacks transparency and corporate access. Whether this was a selling motivator for Akropol or a consideration for Novoship is something upon which we can only speculate.

There are two important things, however, that these two deals taken together illustrate. The first is that there certainly appear to be some conflicting currents in the shipping industry native to this part of the world, as investors are reaching out to bring international investment into the area at the same time as some domestic companies are consolidating their control. The second, and more important, is that this is an active and exciting time for the shipping industry in Russia and its neighbors, with a future that is yet to be determined. So if we may make one more shameless plug, those of you who find this intriguing should consider attending our first annual Russia Maritime & Energy Finance Forum in Moscow on May 20th.

Malaysian Merchant Marine Berhad (MMM)’s rights issue met with less-than-hoped-for results this week. The 56.68 million shares priced at $M1 each, approximately US$0.26, but the issue was 65.6% undersubscribed, which means that 19.50 million rights shares were taken up while underwriters Affin Merchant Bank, Malaysian International Merchant Bankers, Southern Investment Bank, PM Securities Sdn, M&A Securities Sdn and Mercury Securities Sdn picked up the remaining 37.18 million shares.

For MMM, the proceeds should still have been in the realm of $15 million, and the deal is part of a greater fundraising effort being undertaken by the company with Affin Merchant Bank to help fund expansion. Malaysian Merchant Marine was established in 1993 and has both tanker and dry bulk interests, and the company considers its cores strength to be ship management.

Vassilis Vintiadis seems to be one who has taken notes of the type of numbers on our Cash Flow Multiples table, or at least knows the restrictions of purse strings. He is seeking to raise cash to launch Global Ocean Carriers, starting with three bulk carriers, each over 20 years old, for a total purchase price of approximately $45.5 million. As he is seeking to raise around $82 million through a listing of the company on London’s Alternative Investment Market, it is implied that the first three vessels are only to be the beginning.

And why not? Two of Mr. Vintiadis’ identified vessels are vintage dry bulk panamaxes, which can be bought at market prices for around 2x free cash flow based on one-year timecharter rates. And that is assuming a $20 million price for a 60,000 dwt vessel, whereas Mr. Vintiadis both paid a cheaper price and got larger vessels, with sizes of 64,000 and 65,000 dwt and prices of $18.2 million and $17.2 million on his two vintage panamax purchases. The third vessel, the 1982-built Panormos Pride, has a capacity of 35,000 dwt and cost $10.1 million. While this does appear to be quite a good deal, as we all know, vessels that old would also have to pay for themselves fairly quickly and are likely to have higher-than-average operating costs.

Pareto has been in the market place to raise $135 million to be used for the acquisition of two older semi-submersibles by Norwegian shipowner Arne Blystad. The rigs will be taken over in June, and the plan is to list Songa Offshore in the third quarter of this year. Pareto successfully raised $110 million through a convertible bond offering and $25 million in public equity. The investors were primarily international, though among them were counted a few well-known Norwegian private investors.

Following the jack-up ordering spree by Norwegians, who have ordered 12 of 29 new jack-ups over the past 12 months and boast four new companies listed in Oslo, the focus is now expanding into semi-submersible oil rigs.

After initiating bullish coverage on DryShips last week, Dahlman Rose & Company has issued a comprehensive report covering the entire dry bulk shipping sector. With dry bulk IPOs lined up at the SEC and owners believing, with conviction, that the boom will continue, a report predicting that the supply/demand balance will remain tight in the sector for the foreseeable future is a welcome one indeed. The Dahlman Rose analysts attribute the strength of the dry bulk market to the strength of the world economy, and they back up their belief in this with sections dedicated to macro economic drivers, the impact of China and an analysis of bulk commodity markets including steel, iron ore, coal and grain.

The analysts further consider the age profile of the global dry bulk fleet, current orderbooks, shipyard capacity and port congestion to come to a forecast for the supply side of the dry bulk shipping equation. The report concludes that commodity demand will continue to increase faster than supply, particularly as the 37% of the world dry bulk fleet over 20 years old is nearing retirement age. As a result, Dahlman Rose expects the supply/demand imbalance that has proven so fortuitous for ship owners and operators to continue at least another three years “barring a global recession or some exogenous system shock.”

The 2nd Annual Marine Money Istanbul Ship Finance Forum, was held on Thursday, 7th April 2005, at the Swissotel – The Bosphorus in Istanbul. The mood was buoyant as the Turkish shipping community continued to enjoy the high shipping market and the boom in shipbuilding activities in the country’s shipyards. Istanbul was also enjoying considerable focus from foreign financiers and shipping service providers as evidenced by over 70 non-Turkish participants in the total number of 250 speakers and delegates.

We would like to thank our anchor sponsor Geden Lines and our prime sponsor Turkon Line as well as our many corporate sponsors for the success of our event this year. Support as always was given by the Turkish Chamber of Shipping and its president Metin Kalkavan.

The day started with a previously unannounced presentation from Michael Drayton, Chairman-elect of the Baltic Exchange to Metin Kalkavan and Erol Yucel of the Turkish Chamber of Shipping, for the many years of close co-operation between the two.

Our presentations started with a review of the world economic outlook by Dr. Christina Stahn of HSH Nordbank.  This was followed by a wet and dry market review from Galbraiths.  Overall both the economic outlook and the wet market outlook were optimistic. But Dr. Philip Rogers stunned the audience by painting a rather gloomy picture of the dry market over the next 18 months.  The supply of new ships will well outstrip the increased demand, he said. Today’s high freight rates will be a distant dream, and shipowners may well see historical lows again in dry bulk. Needless to say, this caused quite a stir, as well as some aggravated discussion in the coffee break that followed.

The international finance community, represented by DVB Bank, HSH Nordbank, GE Capital and Caterpillar Financial Services discussed lending at the top of the market.  All cautioned against being too aggressive in this high market, but all also reiterated their commitment to the Turkish market in the year ahead.

After lunch we had three presentations on alternative financing opportunities for Turkish owners.  These involved KG Finance, presented by Christian Salamon of Salamon AG, Islamic Finance presented by Bote de Vries of DVB and NFC Shipping Funds and U.S. capital markets by Stefanie Kasselakis of Jefferies & Co. Ms. Kasselakis also discussed market sentiment and, contrary to Galbraiths, painted a fairly rosy picture of the next few years in the dry market with China’s continued growth keeping freight rates healthily high.

After hearing about the importance of class from Gunay Surenkok of DNV, our final session discussed Turkish shipbuilding and its continuing performance riding the boom market.  Turkish bank representatives, as well as panelists from a Turkish shipyard and a Greek owner building in Turkey, advised that Turkish shipbuilding is here to stay, with yard orderbooks full through 2007 and beyond. And the Turkish banks are increasingly willing to finance this construction boom; they are also initiating term loans for Turkish shipowners for vessels post-delivery, something which even last year was still consigned to the drawing board.

Metin Kalkavan of the Turkish Chamber of Shipping and Kevin Oates of Marine Money Greece brought the day to an end with reflective closing remarks.

There is no doubt that Turkish shipping is on the radar screen of the international finance community, and Marine Money is intent on continuing to bring that community to Istanbul.

Incidentally, the night before the conference there was also very enjoyable Speaker’s Dinner, which was attended by virtually all of the major players in the Turkish shipowning community. We were privileged also to have the Minister of Transport, Mr. Binali Yildirim, who gave a speech highlighting developments in Turkish shipping and the maritime sector. To note is that Mr. Yildirim is a naval architect by training and was previously a finance director in a major Turkish shipping sector. That alone shows the determination of Turkey to support its maritime industry!!

Ships have gotten a bit more expensive in recent weeks, with prices holding firm but rates slightly softer, especially in the Pacific. Although we think it is probably just another blip on the radar, softening share prices and cash flows mean that the arbitrage that exists between private sales and public company valuations has compressed a bit, as evidenced by the stock of Diana Shipping, which has been trading below $16 compared to an initial price of $17.

With the exception of the shares issued to Peter Livanos, Euronav has done all of this buying with non-dilutive debt. Today the company announced that it has signed a $1.6 billion senior secured credit facility that was upsized from the original $1.2 billion. The deal is secured and priced at LIBOR + 80.

Lead bookrunner and facility agent on the deal was Nordea who, along with DnB NOR, acted as lead arrangers. A whopping 24 banks came into the deal; Calyon, Citibank, Deutsche Schiffsbank, HSH Nordbank, HypoVereinsbank, Royal Bank of Scotland and Scotiabank acted as co-arrangers. According to a release from the company, despite the upsizing the deal was oversubscribed by more than 58%.

There are loads of interesting things about this deal, which refinances all of the company previous indebtedness (about $500 million) and provides capital for growth and ships to be delivered. First off, with 24 banks in the club, it is one of the most broadly syndicated loans that we are aware of – the most recent General Maritime $825 million deal had a paltry 17 banks. Although we can’t confirm this, we’re also pretty sure that this is the largest secured loan for a shipping company ever. There have been larger deals, of course, for Worldwide/Bergesen and AP Moller, but those are unsecured.

The new Euronav deal looks a bit like the General Maritime $825 million package in that it is comprised of an amortizing term loan and a non-amortizing revolver. Specifically, this transaction consists of a term loan of $865 million and a non-amortizing revolving loan facility of $500 million. There is also a third tranche which is a term loan of up to $235 million, which will be available for the purpose of financing vessels scheduled to be delivered within the next two years (5x suezmax and 1x VLCC).

The new loan will be secured by all of the wholly-owned vessels in the company’s fleet, comprising of two ULCCs, 12 VLCCs, nine Suezmax acquired in conjunction with the Tanklog fleet acquisition, one VLCC newbuilding due to be delivered in May 2005 and five suezmax newbuildings, three of which are due to be delivered in 2006 and two in 2007.

It’s been a series of deals that put Kjell Inge Rokke and his advisors at DnB NOR squarely in the running for the Marine Money Dealmaker of the Year award.

Back in November, when DnB was hired, Kvaerner’s stock price was at NOK 25 and his shipyard had two orphaned containerships and nothing but dreams about securing contracts to build Jones Act tankers. Today, just five months later, the boxships have been sold to Matson at a profit, the share price is at NOK 100 and the company has just signed contracts with OSG for 10 with an option of two Jones Act tankers – a $1 billion deal that is probably the biggest commercial order for ships ever.

The progress has been really and truly amazing, and all of the people involved with this effort at both Kvaerner and OSG should feel proud for having stuck with it. In an industry in which a lot of people take the money and run, Rokke and his team have proven they will do whatever it takes to make their challenging venture a success – something that we think will benefit not only their respective shareholders, but also the aging U.S. fleet.