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Eagle Bulk Shipping – All About the Arbitrage

By Matt McCleery

It’s all about the arbitrage these days.

What we mean by this, of course, is the fact that ships have a higher value on Wall Street than they do in the shipping markets – and not surprisingly there is a steady stream of people looking to capture the difference.

It depends on the age of the vessels, of course, but on average a shipowner can buy a middle-aged vessel at about four times cash flow and sell it to Wall Street investors for about six times cash flow – much more if the company is valued based on its dividend yield.

Here’s where the rubber meets the road: by valuing shipping companies using a multiple of their cash flow generation, issuers of equity can effectively sell their vessels for 1.5-2.0x their value in the sale and purchase market. It is a truly remarkable moment in the evolution of shipping and the capital markets – and not surprisingly the Delta flight between Athens and New York is once again being seen as a direct journey to wealth and early retirement for shipping dealmakers. Continue Reading

Categories: Marine Money | April 1st, 2005 | Add a Comment

Blank Check Stock Offerings

By Glen T. Oxton and Antonios C. Backos, Healy & Baillie, LLP

Blank check offerings of securities in the U.S. public capital markets have been around for some time, but in the past such offerings were primarily associated with small offerings of $5 million or less. Today they are being used in much more sophisticated offerings for hundreds of millions of dollars in many diverse industries – in addition to shipping – such as metals, mining, media and entertainment.

Last December, International Shipping Enterprises, Inc. (“ISE”) concluded an initial public offering of securities in the United States as a blank check company. The deal created great interest in the shipping community because of its size. It successfully raised approximately $182 million after expenses, of which JPMorgan Chase Bank currently holds approximately $180 million in a trust account awaiting the completion of a business combination.

What Is a Blank Check Offering? Continue Reading

Categories: Marine Money | April 1st, 2005 | Add a Comment

Best Practices Part II: Personnel & Compensation

In the previous pages we have heard from a cross-section of bankers about their firms’ strategies, risk tolerance and portfolio profiles. But, as we all know, all the careful strategies and bright ideas cannot go very far without the right people to develop and implement these ideas.

So what sort of employee structure does a successful shipping bank have? How does such a bank compensate its employees? This part of the study can help you to benchmark your own strategies while gauging those of your competition.

Offices, Bankers, Support & Bonuses

With shipping business spread the way it is across far-flung parts of the globe, we thought it would be important to see how many offices banks operate globally. Numbers were reasonable overall, with an average of 3.43 offices, a median of three offices, and a mode of just one. Continue Reading

Categories: Marine Money | April 1st, 2005 | Add a Comment

Adventures in Capitalism

By Matt McCleery

On January 18th, 2005, a special purpose acquisition company called Trinity Partners Acquisition Company Inc. issued a press release saying that it had signed a Letter of Intent for a business combination with Adventure Holdings. Then, in late March, the two companies announced that they had entered into a Definitive Agreement. The lawyers are likely hard at work on the proxy statement, which will be submitted to the SEC, voted on by shareholders, and ideally approved sometime this summer.

For those who don’t know the company, Adventure Holdings was set up as a holding company of shipowning entities and is owned by brothers George and Stathis Gourdomichalis (using an entity called “G Bros”) and their partner Ion Varouxakis (using an entity called “V Capital”). Trinity Partners is an acquisition company that did its IPO in August of 2004 through Brenner Securities and is listed on the NASDAQ bulletin board, where it trades under the symbol (OTCBB: TPQCA). Poseidon Capital in New York brought the parties together and is advising Adventure Holdings on the transaction. Continue Reading

Categories: Marine Money | April 1st, 2005 | Add a Comment

Wan Hai Looks Beyond Taiwan for Bond Deal

Wan Hai Lines has galloped out of Taiwan for its first ever overshore bond deal for up $400 million that will be done through a Singapore unit. Citigroup and Morgan Stanley will market the 10-year deal in May. Wan Hai, rated BBB- by Standard & Poor’s, is Asia’s biggest intra-regional shipper.

Wan Hai Lines forecasts its 2005 net profit will be NT$7.70 bn ($244m), or NT$4.08 a share. With shares trading at NT$34.70, the company is trading at less that 8 times forward PE.

The company has a debt to equity ratio of 53%, hence the strong rating.

A closer look at the orderbook indicates that Wan Hai is headed for the long-haul trades. The company’s orderbook stands at 18 ships, with an average of 4000 teu per vessel, which is significantly larger than the company’s current average vessel size of 4000 teu. These ships will cost somewhere in the region of $900 million.

Considering that China Shipping is already on the equity market and Cosco Container Line is next, FM is not surprised that Wan Hai reached for the bond market. To date, it looks like an iron-clad credit, though deeper water trades can be more treacherous.

Categories: Freshly Minted, The Week in Review | March 31st, 2005 | Add a Comment

Top Reported to be Acquiring Nomikos

Although still in the rumor stage, Top Tankers was reported in the trade press as having struck a deal to acquire AM Nomikos. If true, the deal is yet further evidence of accelerating consolidation in 2005. With shipyards full, companies cash rich, debt and equity abundant and public companies trading at a premium to net asset value, we continue to believe that en bloc deals will dominate in 2005.

Categories: Freshly Minted, The Week in Review | March 31st, 2005 | Add a Comment

Gourdomichaelis Signs Agreement with Trinity in Shipping SPAC Debut

Gourdomichaelis-controlled Adventure Holdings signed what is known as a “Definitive Agreement” with Special Purpose Acquisition Vehicle Trinity Holdings this week. Now the SPAC will draft the proxy statement (which is similar to an F-1), submit the document to the SEC for comments and then go out for a shareholder vote.

Categories: Freshly Minted, The Week in Review | March 31st, 2005 | Add a Comment

Tsakos Tells Story to CNBC

Nick Tsakos appeared on CNBC last Thursday. We think it’s great that the company is getting out and telling its story. As you can see from our Fair Value table, TEN is a very good value relative to other tanker companies (especially so if you include the value of their newbuilding contracts), making it a good buy for investors (or maybe even another tanker company).

Flights between Athens and New York, described as “a direct flight to money,” now have at least one shipping issuer, lawyer or investment banker aboard.

Categories: Freshly Minted, The Week in Review | March 31st, 2005 | Add a Comment

John Wobensmith Goes to Genco, Continues Trend of Bankers to Owners

John Wobensmith, a former banker with First Bank of Maryland, has left American Marine Advisors to join Genco, the dry bulk company owned by OakTree and Peter G, as the company’s CFO. Wobensmith’s departure marks yet another shipping banker moving to the owning side – Evensen, Artnzen, Fagerstall, Pribor…and the list is growing. If there has been any one thing we’ve learned from this, it’s that former bankers make very tough negotiators when they move to the other side of the table.

Categories: Freshly Minted, The Week in Review | March 31st, 2005 | Add a Comment

Natasha Boyden Keeps Busy and Bullish, Inspires Business Week

The ever-affable Natasha Boyden’s initiation on U.S. flag tug and barge transporter Maritrans last week has scored the company good press and a sharply increased share price. Business Week ran an article this week entitled “Smooth Sailing For Maritrans’ Tankers And Tugs”

Natasha Boyden, now of Cantor Fitzergald, this week initiated coverage on DryShips with a Strong Buy recommendation and a price target of $28. She is using 4.8x 2005 cash flow.

Categories: Freshly Minted, The Week in Review | March 31st, 2005 | Add a Comment