By Matt McCleery
As any experienced shipping banker knows, bringing private equity into an existing operating company is generally a brutal experience. The main challenge usually revolves around valuation. Here’s how it works: typically, the financial advisor brings in one or two types of investors, each of which comes with their own unique challenges.
The first of these are the financial buyers. This group brings nothing to the party but money and, maybe, “a guy who used to work in the business.” Take that last part for what it’s worth. This “guy” generally knows only about enough to be dangerous and slow down meetings. While sometimes these types of investors give the shipping company a “promote” of, say, 10-15% of the equity, typically they assign zero value to anything that isn’t big and doesn’t float and can be releveraged by someone else. The typical reaction of the shipping company, whose management have dedicated their lives to learning the industry, to this valuation technique is “take a long walk off a short pier.”
The next group of potential investors are those strategic in nature, such as other shipping companies. We once had a cover of Marine Money entitled “Herding Cats” with a lovely illustration of a farmer trying to round-up wild cats, a good analogy for bringing together two shipping companies. What usually happens here is that each shipowner thinks the others ships, company, people, maintenance programs, ship management, chartering relationships, crew, banks, and maybe even food¸ are inferior to their own. And then there is the issue of rights conferred upon minority interests. As any good shipping banker and investor knows full well, being a minority interest in a private company can really stink. These sorts of deals generally do not go far. Continue Reading
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Marine Money | March 2nd, 2005 |
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By Kevin Oates
Last year we staged our first annual Marine Money Istanbul Ship Finance Conference, and it was very successful with over 180 attending. We also wrote in Marine Money magazine about how Turkish banks were contributing to the development of shipping in Turkey by financing the domestic construction of vessels, especially around the Tuzla shipbuilding area.
We would like to give an update of the activities of three Turkish banks involved in the financing of these activities, and demonstrate how serious these banks are and how far they have come in terms of scope and strategy in only a few years.
Our second Marine Money Istanbul Ship Finance Conference will be held on 7th April 2005 at the Swissotel-The Bosphorus. Please come and join us (information from mia@marine-marketing.gr ). Continue Reading
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Marine Money | March 1st, 2005 |
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By Matt McCleery
George Economou stunned the ship finance community worldwide and silenced almost all his harshest critics with the extraordinarily successful floatation of DryShips Inc. on the NASDAQ on February second. The final deal nearly doubled from its original size, going from 7.1 million shares in the initial prospectus to an astonishing 13.0 million shares (before underwriters’ over-allotments). Even with the massive jump in size, at $18 the shares still priced favorably compared to the red herring price of $17 and at the high end of the $16-18 range, raising for the company a gross $234 million against an initial target of $120.7 million (both before shoe and underwriters’ commissions). sions). Market sources at the time said that the deal was nine times oversubscribed, and the stock price quickly jumped another 10% in heavy trading. The execution of the offering was certainly a success for underwriters Cantor Fitzgerald & Co., Hibernia Southcoast Capital, Oppenheimer & Co., Dahlman Rose & Company and HARRISdirect.
Economou’s company, which owned a total of five panamax vessels and one capesize vessel with an average age of 18 years at the time of the offering, had originally planned to use the proceeds to purchase an additional eight panamax and one capesize vessel, as well as two handymax vessels, which would bring the combined fleet average age to 13 years. These were to be purchased with $111.5 million in net proceeds from the offering together with $145 million under a new senior secured credit facility with Commerzbank AG and HSH Nordbank AG, $30 million under another credit facility and 1.35 million shares. Now, having acquired its 11 identified vessels, but with more than $100 million more than anticipated in cash, the company has plenty of other options, and investors are already beginning to have the opportunity to gauge the company’s growth potential. Continue Reading
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Marine Money | March 1st, 2005 |
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The high asset values of 2004 provided an outstanding opportunity for private equity firms to exit their investments either through public offerings or private sales – and that is exactly what we saw in 2004. Although there was some institutional buying, such as Temasek with Neptune Orient Lines, Castle Harlan with Horizon Lines and Fortress’ attempt at Stelmar, the predominant theme of the year was private equity firms selling down enough of their holdings to pay back their initial investment with a nice return – and letting their residual holdings remain in their portfolio companies. In addition 2004 saw private equity sponsors like Wexford and Oak Tree selling significant amounts of stock in General Maritime.
Private equity firms contribute more to the companies they buy than money. What you will find particularly impressive about the private equity firms mentioned in these pages is how much value their capital, financial discipline and management expertise has created and the systematic way they go about the process of acquisition, growth and disposition. Not surprisingly, the fingerprints of private equity were all over merger and acquisition, public equity and debt deals outlined in our two award issues. Continue Reading
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Marine Money | March 1st, 2005 |
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If yield was the thread that wove together ship finance transactions in 2004, then it’s not surprising that the mother of all yield driven markets, the high yield bond market, was highly receptive to shipping this year. Investors generally felt that the high yield market would offer returns superior to equities. With the Dow Jones Industrial Index climbing just 8% in 2004, they were spot on.
The demand for yield was universal around the planet, with shipping companies of all shapes and sizes tapping bond markets around the world in a wide variety of currencies. This year also saw the introduction of new buyers for lower rate paper, such as hedge funds, who are able to use leverage to turn a 10% B- or CCC rated deal into a 20% return.
For the stronger borrowers, terms were extraordinary, highlighted by Hornbeck picking up nearly 500 basis points on its bond refinancing, OSG securing a 20-year amortization, and virtually every bond in the shipping sector trading sharply over par to push some yields into the 5% range. The favorable market fundamentals also gave financially weaker companies access to a market that has for many years been closed to them, at any price. Continue Reading
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Marine Money | March 1st, 2005 |
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The Editor’s Choice Award goes to that exceptional transaction that does not easily fit into any other category – or relies on many capital components to function properly. Over the years it has included the NIB Latitude Synthetic shipping loan securitization and the mezzanine facility that enabled the First Ship Lease structure. This year’s Editor’s Choice award goes to Jefferies and Citigroup for the work they did for Ship Finance International.
When we first sat down with our staff and advisors to judge this deal, we weren’t exactly sure where to put it. The $1.1 billion bank loan was impressive, but so was the $580 million bond deal. The valuation and spin off of the equity would have made it a logical choice in the equity category, but the deal was equally compelling as an entry in the realm of restructurings since the separation of vessel ownership and vessel management was nothing short of revolutionary in the shipping business. The deal was a contender in almost every category in which we give awards. Continue Reading
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Marine Money | March 1st, 2005 |
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The fact that this award category even exists for the international ocean shipping industry is pretty darned remarkable when you stop and think about it. After all, it was only a couple of years ago that shipping companies were having a hard time convincing the capital markets they would even be alive the next year, never mind using sophisticated derivative instruments that have conversion maturities a whopping 20 years in the future.
But then a funny thing happened. Even though the conventional wisdom was that the volatility of shipping stocks was a negative for investors, the convertible bond market and the Black Schoales model it relies on figured out that volatility actually has some real value. But such is the nature of progress and, thanks to the fact that the shipping and bond markets were equally white hot, some truly inconceivable deals were executed. Continue Reading
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Marine Money | March 1st, 2005 |
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Marine Money’s 4th Annual German Ship
Finance Forum
Marine Money’s 4th Annual German Ship Finance Forum got off to a smooth start on Thursday with a very brief welcome from organizers Mr. Torsten Temp of HypoVereinsbank and Marine Money’s Peder Bogen. Chairman Dr. Henning Winter of Deutsche Schiffsbank’s board gave an overview of the topics to be addressed during the conference.
Dr. Martin Hüfner, also of HypoVereinsbank, then opened his macroeconomic discussion with an anecdote comparing the links between illness, diet and nationality. He concluded: “Eat what you like! It’s the English that kills you.” As for the global economy, Dr. Hüfner projects growth rates of 3% in 2005 and 2006, down from 4% in 2004, but he describes this change as “back to normality,” noting that 3% is, in fact, as healthy, sustainable growth rate. This idea of a fall back to normality would emerge as a theme throughout the conference, not only regarding the global economy, but more relevantly across the shipping markets.
Dr. Hüfner also noted that a soft landing in China is both important and likely, and that the EMU’s relative position in the global economy is improving. He anticipates a flattening of commodity price increases by 2006 and looks for oil prices to stay in the realm of $40-$45. Finally, Dr. Hüfner explained that the equilibrium interest rate dictated by economic models (in the 5.5-6% range for the US) is substantially higher than what currently exists. He thus expects interest rates to rise, advising shipowners “if you want to have long term money, you should take it today.”
Next up was a discussion moderated by Mr. Nigel Gardiner of Drewry Shipping Consultants, with Mr. Gardiner asking the question of how long this “unprecedented time” would last. Mr. Jarle Hammer of Fearnleys began his speech by noting that he remembered 1973, which was “even better for tankers.” He also remembered, somewhat less fondly, what happened in the shipping markets just after 1973. He discussed how 2001 vessels were going for 26% more than newbuildings while 10-year-old vessels were at times costing only 4% less due to “the value of being here and now.” Mr. Hammer did note that timecharter rates, like global economic growth, are expected to decrease, but to stay at healthy levels.
Mr. Nick Hubbard of Howe Robinson Ship Brokers opened his discussion of the container market in an interesting way, noting that his colleague who normally would have spoken was instead working on a charitable project in Nepal, demonstrating that “there are more important things than ships and boxes.” As for box ships, Mr. Hubbard lauded double-digit growth across all segments of the market in the past year. However, going forward he drew a firm distinction between the North/South and feeder trades, which he expects to remain under supplied, and the East/West trades, which he expects to creep into over supply. He again asserted that freight rates would and should fall, but that they are still very profitable.
Ms. Eva-Maria Busch of Drewry Shipping Consultants then discussed port congestion in a very different light than shipping analysts tend to see. Instead of the decrease in effective supply, and thus improving fundamentals, she saw the long term problems that could be expected to stem from the constant frustration, delays, and extra costs borne by those hiring ships. She expects that costs will be passed more and more on to shippers, while also causing those in need of transportation to consider alternatives to shipping. Importantly, Ms. Busch wants governments to recognize the need for bigger ports and for ports themselves to invest in better technology and more skilled employees.
After a brief coffee break, Mr. Didier Chaleat of Bureau Veritas discussed technical risk. He argued that Class in many cases has to act on behalf of flag states and went through the gist of new classification rules introduced by Bureau Veritas. Mr. Chaleat also noted the need for more intervention and earlier involvement on behalf of classification societies, and stated that his organization’s primary goals are to reduce risk to a minimum and improve the efficiency and long term quality of assets.
Dr. Albrecht Gundermann of LISCR (Deutschland) GmBH then discussed the burdening cost to shipowners of regulatory compliance – or, more accurately, non-compliance. He noted that in 2004 only 0.5% of standard VLCC operating expenditures go to direct costs associated with a flag state, whatever the state. By contrast, the costs of delays caused if, for example, the flag state cannot provide certain documents immediately can be quite high. He ended with the query to shipowners “what has your flag state done lately for you?”
The morning closed with a briefing by Peder Bogen on the state of the banking markets, drawing the conclusion that spreads are just too low and a lively panel discussion featuring Mr. Ingmar Loges, Mr. Hans Petter Aas, Mr. Jean-Yves Gueritaud, Mr. Tjark Woydt and Mr. Han Verschoor. The panelists discussed the fact that during times of low spreads, they must choose loans to make based on quality in order to protect downside risk.
After a soothing lunch, the crowd was reinvigorated for a review of the equity markets by Craig Fuehrer, now of Deutsche Bank Securities. Mr. Fuehrer said that he felt his prediction from Marine Money Week in June still held true: “Big deals and consolidation will continue!”
Glen Oxton of Heally & Baillie LLP then discussed International Shipping Enterprises and the whole idea of a “blank check” company. While the format used by ISE for their offering is usually reserved for “penny stock” offerings of under $5 million – contrasted to ISE’s $180 million plus – Mr. Oxton was able to explain the protection mechanisms for shareholders in the company in a way that made the deal sound much more reasonable than it first appeared, though he did note that ISE “probably have a business plan, they just haven’t disclosed it yet.” He also attributed their success to the strong demand for shipping issues and the credibility of the company’s management.
Bote de Vries of Navigation Finance Corp. then gave a discussion on Islamic Finance, explaining rules like the prohibition of interest, as well as how these deals can still be worked in a way that can be very attractive to those involved. He noted that Sharia’h compliant deals can be very competitive as they have ROE requirements less than the 15-20% typically required of Anglo-Saxon funds while the fees are marginal compared to a German KG alternative.
The last briefing was by Mr. Stephen Hackett of Global Capital Finance who discussed the incredible array of leasing options available. Two final panels closed out the afternoon. The first, moderated by Dr. Winter and composed of Mr. Tobias König, Dr. Axel Schroeder, Mr. Chiristian Freiherr von Olderhausen, Dr. Torsten Teichert and Mr. Axel Steffen, discussed how to cope with high asset prices and a strong euro. A key theme was that asset prices had to be looked at in the context of the lifelong earning prospects of a vessel. In other words, a lucrative 5-year charter does not necessarily justify an overpriced vessel.
This was followed by a lively discussion among Dr. Klaus Meves, Mr. Günther Casjens, Mr. Bertram Rickmers, Mr. Claus-Peter Offen, and Dr. Bernd Kortüm. The three looked at the current high market, and were in relative agreement about some things, like the idea that “just-in-time” service by liners is no longer really feasible. However, they disagreed heartily about the near term future of the container market. Several of the panelists were optimistic that rates would fall softly to profitable levels, while Mr. Rickmers in particular was adamant that prospects for containerships over the next few years are not very good.
Dr. Winter and Mr. Bogen then closed a fascinating day for ship finance. Afterwards, attendees moved into the next room with great windows overlooking the port in Hamburg to enjoy some well-deserved cocktails and some good German beer.
Marine Money’s 4th Annual German Ship Finance Forum got off to a smooth start on Thursday with a very brief welcome from organizers Mr. Torsten Temp of HypoVereinsbank and Marine Money’s Peder Bogen. Chairman Dr. Henning Winter of Deutsche Schiffsbank’s board gave an overview of the topics to be addressed during the conference.
Dr. Martin Hüfner, also of HypoVereinsbank, then opened his macroeconomic discussion with an anecdote comparing the links between illness, diet and nationality. He concluded: “Eat what you like! It’s the English that kills you.” As for the global economy, Dr. Hüfner projects growth rates of 3% in 2005 and 2006, down from 4% in 2004, but he describes this change as “back to normality,” noting that 3% is, in fact, as healthy, sustainable growth rate. This idea of a fall back to normality would emerge as a theme throughout the conference, not only regarding the global economy, but more relevantly across the shipping markets.
Dr. Hüfner also noted that a soft landing in China is both important and likely, and that the EMU’s relative position in the global economy is improving. He anticipates a flattening of commodity price increases by 2006 and looks for oil prices to stay in the realm of $40-$45. Finally, Dr. Hüfner explained that the equilibrium interest rate dictated by economic models (in the 5.5-6% range for the US) is substantially higher than what currently exists. He thus expects interest rates to rise, advising shipowners “if you want to have long term money, you should take it today.”
Next up was a discussion moderated by Mr. Nigel Gardiner of Drewry Shipping Consultants, with Mr. Gardiner asking the question of how long this “unprecedented time” would last. Mr. Jarle Hammer of Fearnleys began his speech by noting that he remembered 1973, which was “even better for tankers.” He also remembered, somewhat less fondly, what happened in the shipping markets just after 1973. He discussed how 2001 vessels were going for 26% more than newbuildings while 10-year-old vessels were at times costing only 4% less due to “the value of being here and now.” Mr. Hammer did note that timecharter rates, like global economic growth, are expected to decrease, but to stay at healthy levels.
Mr. Nick Hubbard of Howe Robinson Ship Brokers opened his discussion of the container market in an interesting way, noting that his colleague who normally would have spoken was instead working on a charitable project in Nepal, demonstrating that “there are more important things than ships and boxes.” As for box ships, Mr. Hubbard lauded double-digit growth across all segments of the market in the past year. However, going forward he drew a firm distinction between the North/South and feeder trades, which he expects to remain under supplied, and the East/West trades, which he expects to creep into over supply. He again asserted that freight rates would and should fall, but that they are still very profitable.
Ms. Eva-Maria Busch of Drewry Shipping Consultants then discussed port congestion in a very different light than shipping analysts tend to see. Instead of the decrease in effective supply, and thus improving fundamentals, she saw the long term problems that could be expected to stem from the constant frustration, delays, and extra costs borne by those hiring ships. She expects that costs will be passed more and more on to shippers, while also causing those in need of transportation to consider alternatives to shipping. Importantly, Ms. Busch wants governments to recognize the need for bigger ports and for ports themselves to invest in better technology and more skilled employees.
After a brief coffee break, Mr. Didier Chaleat of Bureau Veritas discussed technical risk. He argued that Class in many cases has to act on behalf of flag states and went through the gist of new classification rules introduced by Bureau Veritas. Mr. Chaleat also noted the need for more intervention and earlier involvement on behalf of classification societies, and stated that his organization’s primary goals are to reduce risk to a minimum and improve the efficiency and long term quality of assets.
Dr. Albrecht Gundermann of LISCR (Deutschland) GmBH then discussed the burdening cost to shipowners of regulatory compliance – or, more accurately, non-compliance. He noted that in 2004 only 0.5% of standard VLCC operating expenditures go to direct costs associated with a flag state, whatever the state. By contrast, the costs of delays caused if, for example, the flag state cannot provide certain documents immediately can be quite high. He ended with the query to shipowners “what has your flag state done lately for you?”
The morning closed with a briefing by Peder Bogen on the state of the banking markets, drawing the conclusion that spreads are just too low and a lively panel discussion featuring Mr. Ingmar Loges, Mr. Hans Petter Aas, Mr. Jean-Yves Gueritaud, Mr. Tjark Woydt and Mr. Han Verschoor. The panelists discussed the fact that during times of low spreads, they must choose loans to make based on quality in order to protect downside risk.
After a soothing lunch, the crowd was reinvigorated for a review of the equity markets by Craig Fuehrer, now of Deutsche Bank Securities. Mr. Fuehrer said that he felt his prediction from Marine Money Week in June still held true: “Big deals and consolidation will continue!”
Glen Oxton of Heally & Baillie LLP then discussed International Shipping Enterprises and the whole idea of a “blank check” company. While the format used by ISE for their offering is usually reserved for “penny stock” offerings of under $5 million – contrasted to ISE’s $180 million plus – Mr. Oxton was able to explain the protection mechanisms for shareholders in the company in a way that made the deal sound much more reasonable than it first appeared, though he did note that ISE “probably have a business plan, they just haven’t disclosed it yet.” He also attributed their success to the strong demand for shipping issues and the credibility of the company’s management.
Bote de Vries of Navigation Finance Corp. then gave a discussion on Islamic Finance, explaining rules like the prohibition of interest, as well as how these deals can still be worked in a way that can be very attractive to those involved. He noted that Sharia’h compliant deals can be very competitive as they have ROE requirements less than the 15-20% typically required of Anglo-Saxon funds while the fees are marginal compared to a German KG alternative.
The last briefing was by Mr. Stephen Hackett of Global Capital Finance who discussed the incredible array of leasing options available. Two final panels closed out the afternoon. The first, moderated by Dr. Winter and composed of Mr. Tobias König, Dr. Axel Schroeder, Mr. Christian Freiherr von Olderhausen, Dr. Torsten Teichert and Mr. Axel Steffen, discussed how to cope with high asset prices and a strong euro. A key theme was that asset prices had to be looked at in the context of the lifelong earning prospects of a vessel. In other words, a lucrative 5-year charter does not necessarily justify an overpriced vessel.
This was followed by a lively discussion among Dr. Klaus Meves, Mr. Günther Casjens, Mr. Bertram Rickmers, Mr. Claus-Peter Offen, and Dr. Bernd Kortüm. The three looked at the current high market, and were in relative agreement about some things, like the idea that “just-in-time” service by liners is no longer really feasible. However, they disagreed heartily about the near term future of the container market. Several of the panelists were optimistic that rates would fall softly to profitable levels, while Mr. Rickmers in particular was adamant that prospects for containerships over the next few years are not very good.
Dr. Winter and Mr. Bogen then closed a fascinating day for ship finance. Afterwards, attendees moved into the next room with great windows overlooking the port in Hamburg to enjoy some well-deserved cocktails and some good German beer.
OSG Posts “Spectacular” Quarterly and Annual Results
OSG’s magical Morten Arntzen has done it again with the company posting the “highest annual and quarterly net income in the Company’s history with $401 million and $211 million respectively” stated Arntzen in the Company’s earnings release report. The 2004 net income, at $10.26 per share compared with last year’s at $121 million, or $3.49 per share.
Not bad for a year’s work, as Arntzen completes his first year as Chief Executive Officer of this historically strong company. Hired last year to take over from Morton Hyman, who had been at OSG for 40 years, Arntzen has certainly taken command of a strong corporate ship, and steered her into even more profitable waters.
Arntzen attributes OSG’s positioning for future growth on four “transforming” events: the enactment of the 2004 Jobs Creation Act, the partnership with QGTC in the commitment to build four LNG vessels, the acquisition of Stelmar Shipping, and the Company’s recommitment to the US Flag business.
The Jobs Creation Act, which permits indefinite deferral of taxation on foreign shipping income until it is repatriated to the US, places “the Company on a level playing field with its offshore competitors” stated Arntzen. “Had the tax deferral on foreign shipping income been effective for 2004, the Company’s provision for federal income taxes of $79.8 million for the year would have been essentially eliminated.”
On the OSG front, the Company is surging into this sector with a vengeance. In a joint venture with Qatar Gas Transport Company (QGTC), OSG will build 4 216,000 cbm LNG gas carriers coming on stream in late 2007 and early 2008. These four vessels, the largest ever built, will commence 25-year charters to Qatar Liquified Gas Company. A new business unit for this activity, headed by Angus Campbell, has been established in Newcastle, UK, where OSG currently runs its international ship management.
The biggest news headlining 2005 was OSG’s acquisition of the Greek owned Stelmar Shipping. After a tumultuous year of rumour and innuendo surrounding other suitors, Stelmar’s board welcomed OSG’s takeover bid. This was consummated in January with Arntzen ringing the closing bell of the New York Stock Exchange.
To accommodate the integration of Stelmar into the OSG organization, Newcastle has been targeted as the “crude tanker center of excellence” with Athens identified as the “product tanker center of excellence” resulting in a “world-class technical organization”.
The deal makes OSG the second largest publicly owned tanker company in the world, the largest based in the United States. OSG now boasts a fleet of 100 vessels. Savings from the deal have already been realized through refinancing and insurance rebidding.
Rounding out OSG’s growth plans is its recommitment to its US Flag business with the signing in February of four agreements with MARAD to enter three Product carriers and one Pure-Car Carrier into the US Maritime Security Program (MSP) for 10-year terms. “There is an acute need for investment in this sector. We are pursuing building a series of ships in a US yard”.
In the conference call, Arntzen underscored OSG’s commitment to maintaining a strong balance sheet. “We paid $1.3 billion for Stelmar without new equity” stated Arntzen, noting that both Moody’s and S & P maintained OSG’s rating after the deal. “Additionally” noted Arntzen “we still have $700 million in liquidity and the majority of our debt is mortgage-free. Our young fleet is the envy of the industry. We are still assessing opportunities and are poised to make acquisition”.
Arntzen also pointed to OSG’s compliance with Section 404 of Sarbanes-Oxley and indicated their auditors will be releasing a clean opinion with no material weaknesses.
OSG’s magical Morten Arntzen has done it again with the company posting the “highest annual and quarterly net income in the Company’s history with $401 million and $211 million respectively” stated Arntzen in the Company’s earnings release report. The 2004 net income, at $10.26 per share compared with last year’s at $121 million, or $3.49 per share.
Not bad for a year’s work, as Arntzen completes his first year as Chief Executive Officer of this historically strong company. Hired last year to take over from Morton Hyman, who had been at OSG for 40 years, Arntzen has certainly taken command of a strong corporate ship, and steered her into even more profitable waters.
Arntzen attributes OSG’s positioning for future growth on four “transforming” events: the enactment of the 2004 Jobs Creation Act, the partnership with QGTC in the commitment to build four LNG vessels, the acquisition of Stelmar Shipping, and the Company’s recommitment to the US Flag business.
The Jobs Creation Act, which permits indefinite deferral of taxation on foreign shipping income until it is repatriated to the US, places “the Company on a level playing field with its offshore competitors” stated Arntzen. “Had the tax deferral on foreign shipping income been effective for 2004, the Company’s provision for federal income taxes of $79.8 million for the year would have been essentially eliminated.”
On the OSG front, the Company is surging into this sector with a vengeance. In a joint venture with Qatar Gas Transport Company (QGTC), OSG will build 4 216,000 cbm LNG gas carriers coming on stream in late 2007 and early 2008. These four vessels, the largest ever built, will commence 25-year charters to Qatar Liquified Gas Company. A new business unit for this activity, headed by Angus Campbell, has been established in Newcastle, UK, where OSG currently runs its international ship management.
The biggest news headlining 2005 was OSG’s acquisition of the Greek owned Stelmar Shipping. After a tumultuous year of rumour and innuendo surrounding other suitors, Stelmar’s board welcomed OSG’s takeover bid. This was consummated in January with Arntzen ringing the closing bell of the New York Stock Exchange.
To accommodate the integration of Stelmar into the OSG organization, Newcastle has been targeted as the “crude tanker center of excellence” with Athens identified as the “product tanker center of excellence” resulting in a “world-class technical organization”.
The deal makes OSG the second largest publicly owned tanker company in the world, the largest based in the United States. OSG now boasts a fleet of 100 vessels. Savings from the deal have already been realized through refinancing and insurance rebidding.
Rounding out OSG’s growth plans is its recommitment to its US Flag business with the signing in February of four agreements with MARAD to enter three Product carriers and one Pure-Car Carrier into the US Maritime Security Program (MSP) for 10-year terms. “There is an acute need for investment in this sector. We are pursuing building a series of ships in a US yard”.
In the conference call, Arntzen underscored OSG’s commitment to maintaining a strong balance sheet. “We paid $1.3 billion for Stelmar without new equity” stated Arntzen, noting that both Moody’s and S & P maintained OSG’s rating after the deal. “Additionally” noted Arntzen “we still have $700 million in liquidity and the majority of our debt is mortgage-free. Our young fleet is the envy of the industry. We are still assessing opportunities and are poised to make acquisition”.
Arntzen also pointed to OSG’s compliance with Section 404 of Sarbanes-Oxley and indicated their auditors will be releasing a clean opinion with no material weaknesses.
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Equity,
Freshly Minted | February 24th, 2005 |
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Robin Das – Departs WestLB, Joins HSH Nordbank AG
In a move nicely timed to correspond to our 4th Annual Ship Finance Forum – Hamburg held today, our friends at HSH have hired Robin Das as the Head of the newly created Structuring and Development unit in the Shipping Department effective February 22, 2005. Robin Das is, of course, known to many of you from his days at JP Morgan and WestLB. This move is a significant one for HSH, which has the largest shipping portfolio in the world with about $20 billion in drawn and undrawn facilities. Robin’s role in the massive bank, a combination of Hamburgische Landesbank and LB Kiel, will be to offer “complex finance structures”. For example, the Bank has already financed three LNG carriers as sole underwriter during 2004. According to the release, “Structuring and Development” is a service provider for the other units in the Shipping Department of HSH Nordbank and is responsible for developing innovative financial products. “Structuring and Development” will focus on larger, complex and structured finance products for the Shipping Department’s customers, thereby supporting its other units by systematically broadening and diversifying its product base for the benefit of its customers.”
In a move nicely timed to correspond to our 4th Annual Ship Finance Forum – Hamburg held today, our friends at HSH have hired Robin Das as the Head of the newly created Structuring and Development unit in the Shipping Department effective February 22, 2005. Robin Das is, of course, known to many of you from his days at JP Morgan and WestLB. This move is a significant one for HSH, which has the largest shipping portfolio in the world with about $20 billion in drawn and undrawn facilities. Robin’s role in the massive bank, a combination of Hamburgische Landesbank and LB Kiel, will be to offer “complex finance structures”. For example, the Bank has already financed three LNG carriers as sole underwriter during 2004. According to the release, “Structuring and Development” is a service provider for the other units in the Shipping Department of HSH Nordbank and is responsible for developing innovative financial products. “Structuring and Development” will focus on larger, complex and structured finance products for the Shipping Department’s customers, thereby supporting its other units by systematically broadening and diversifying its product base for the benefit of its customers.”
