American Marine Advisors

When AMA was founded in 1987, the intention was to fill a void presented by an absence of knowledge about and commitment to the global shipping industry by Wall Street.  As evidenced by the shipping high yield debacle of the last three years, the niche AMA intends to continue mining is rich with opportunity.  Indeed, AMA has been gearing up the last three years to better service their niche The company struggled in the beginning, but after a couple of years, the company made good profits, very much on S&P related deals. One would have to say, however, that it was not until the company decided to move from its Greenwich, Connecticut offices into 200 Park Avenue that business really started too boom.
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BUNKER HEDGING: THE PAST AND THE FUTURE, Should Banks Risk It?

by Peter Crumbine, Vice President- Oil Derivatives, Sempra Energy Trading

The Past
In March, 1999, when OPEC decided to curb production, Rotterdam 380 cst could have been fixed at $69.50/mt for the entire year 2000.  Historically, Rotterdam 380 cst has averaged $88/mt with monthly averages ranging between $54-143/mt.  So even without an OPEC agreement, the downside was small and the upside was huge.

Here are some quotes from my 1999 weekly reports:

January 7: “Prices are extremely low in an absolute sense, and eventually prices will be much higher.”  February 8: “Prices will rebound…they always do.”   February 12:  “It is hard to see prices going much lower.”  March 15:  “If (OPEC’s) 2 MMBD cutback holds and if Asia begins to bounce back, we will most certainly see a continuation of the current uptrend.”   (Note: In spite of this so-called “uptrend,” the price for Rotterdam 380 cst in 2000 had only increased from $69.50 to $71.00/mt.)  April 19:  “This market will not go away.  Prices have been a lot higher in the past and the trend is clearly up.”  May 5: “We have a serious bull market.”
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AMERICAN DEPOSITARY RECEIPTS: Finding the Way Forward with a New Finance Facility

by Geoff Uttmark

“For the world, our Country and the Navy,” was the victory pronouncement when USS NAUTILUS (SSN 571) became the first ship to reach 90 degrees north latitude.  Commander William Anderson’s log entry at the start of the historic voyage reveals a more humble conviction and determination, since no one in 1958 knew the precise depth of the Arctic Ocean or the thickness of the polar ice cap.

“I believe I am always divinely guided,
I believe I will always take the right course,
I believe God will make a way
Where there is no way.”

For public consumption the daring voyage of NAUTILUS proved the superiority of nuclear powered submarines. But the Top Secret part of the mission was to prove the exactitude of the inertial navigation system – transiting submerged from Pearl Harbor to Groton, CT via the North Pole relying on gyrocompass, computers and sonar. “Finding the way” was an exercise in applied faith and technology. NAUTILUS and her progeny changed defense planning forever, and reaffirmed that new technology drives new strategies and tactics.
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The Nutcracker

by John Blankley

Imagine a very large room at the top of a bank building in New York and a very large table in that room. The room is full of people, some of whom you know. They are bankers you’ve seen before, but most are new faces. You enter with your Chairman, your Counsel and your Advisor and everyone moves forward, hands outstretched – all ready to shake you warmly…by the throat.

Ladies & Gentlemen, I thought this would be a good opening line for a novel about my experiences during the CH 11 proceedings of Hvide Marine. But of course the novel has already been written – by Tom Wolfe in “A Man in Full” the Saddlebags chapter. It should be essential reading for anyone contemplating anything so rash as borrowing money from a bank.

So I think I will make this my theme for today: the role of finance in our business and what can happen if things go wrong. Richard du Moulin spoke earlier yesterday about the chain of responsibility in our business and maybe deliberately maybe not omitted to mention the lenders and their role and responsibility. So let that be my task today with special emphasis on “The recent unpleasantness” as I refer to Hvide’s bankruptcy. (As an aside I would remind you that this was the phrase used by old ladies as recently as the 50′s to refer to the US Civil War!)
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Have Dot, Will Travel

Frontline has recently taken a major stake in one. Some people claim that charterers will prefer theirs. One shipowner used one to bail out of a company that was about to take on water. The children of shipowners are interested in them, but preferably with other people’s money. Investment bankers see them as a new way to generate fees and lawyers will benefit from them irrespective of what happens. AMA is representing several. Commercial bankers both love them and hate them and Tufton plans to invest in one because they believe the timing is right. Shipowners who haven’t done one feel like they’re missing the last chance at free money. Most haven’t made any money for their investors.

Déjà vu? No, we’re not talking about high yield, but today’s rush to the internet market has charged the air in the ship finance community in a manner and scale that dwarfs the high yield buzz of 1997. Unlike high yield, which reinforced the industry’s reputation as secretive and self-serving and further alienated it from institutional investors, the internet has to date done, and promises to do, just the opposite.
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Freshly Minted – March 30, 2000

LOW YIELD

GOLDEN OCEAN’ ONE SHIP AT A TIME

Freshly Minted understands that Frontline has agreed to provide $13 million in mezzanine financing to ensure tomorrow’s delivery of VLCC Hull 1628 from Kawasaki Heavy. The ship is being financed by Chase and Kawasaki has agreed to provide top off financing. 1628 is going on charter to Shell. Hull 1628’s sister, 1638, is scheduled to be delivered in from Kawasaki in June. Freshly Minted also understands that Frontline may have agreed to provide Golden Ocean with a $5 million DIP facility. The sole use of proceeds will be to pay advisors and other professional fees associated with the restructuring. Advisors include American Marine Advisors and Seward & Kissel for Golden and Zolfo Cooper and Cadwalader for the unsecured creditors. Finally, FM has learned that Al Fried, one of Golden’s largest bondholders, has resigned from the Committee of Unsecured Creditors for reasons unknown to us. Mr. Freid has been replaced by Jess Ravich of Libra Securities. Mr. Ravich was one of the original underwriters of the Golden Ocean bond offering and, we understand, is the holder of warrants for 8% of the equity in Golden Ocean. The warrants have a strike price of about $46 and are decidedly out of the money. It is our understanding that Golden Ocean was counseled to attach the equity warrants onto the bonds to give bondholders some upside. However, market sources indicate that underwriters “clipped” the detachable warrants from notes and retained them. We will give a extensive review of the transaction involving Fred Cheng, Cobelfret, Nick Goymer and the Lowlands Rose in next week’s issue.

NAVIGATOR MANAGEMENT TERMINATES MARLINK A Termination notice has been sent to NavGas bondholders informing them that Navigator Management has terminated the company’s management agreement with Marlink. Getting rid of Marlink may not be that simple. The NavGas indenture and security agreement indicates that the NavGas trustee may have been assigned control over the agreement. The reason for this assignment may be that Marlink was a key member of the original Navigator team and the trustee was given control in an effort to protect bondholder interests. Marlink has commenced arbitration.

BANKS AND BANKERS Continue Reading

Freshly Minted – March 23, 2000

CONNECTICUT MARITIME ASSOCIATION SHIPPING 2000

As usual almost 1000 members of the shipping industry were at the Connecticut Maritime association trade show and conference this week. If we were to list all of the notables who attended there would be no room for news in this week’s FM (though there really isn’t much going on in ship finance). However some color can be had by a simple mention of a few – Westye Hoegh, Philip Shapiro, Richard du Moulin, Philip Embiricos, this year’s award recipient Per Heidenreich, Claes Davidsson, Chuck Delamater, Kevin Kennedy, Peter Georgiopoulos and on and on…

Notable Quotes “In the end, no amount of asset sales or cost cutting could have helped.” John Blankley, Seafirst Capital and former CFO of Hvide Marine on Hvide Marine Bankruptcy and Restructuring.

“It is very expensive indeed to be poor.” John Blankley on the cost of loans in technical default, financial advisors, attorneys and other advisors to the reorganization process.

“If they are prepared to discount fees, they are prepared to discount standards.” Paul Slater, First International on Class Societies.

“The Erika is an accident the European Commission could have designed.” David Cockroft, Executive Director, International Transport Worker’s Federation, on the EU Commissioner’s opportunity to make a legislative and regulatory statement.

“The banks are still a great part of the evil.” David Cockroft on contributors to the industry’s ills.

“I am working on internet time, that is where one week is equivalent to four weeks of real time.” Dhiren Patel, VP at Freightdesk.com, the Quartel-led freight forwarder ASP, commenting on all that has taken place since Freightdesk was launched one week earlier.

“BUT YOUR CREDO SHOULD BE THIS MARIO ANDRETTI QUOTE: “IF THINGS SEEM UNDER CONTROL, YOU’RE JUST NOT GOING FAST ENOUGH” Johnny Kulukundis, Charles Weber, Vision Division Continue Reading

Freshly Minted – March 16, 2000

Correction:

Danaos Holdings Ltd

In the article published in the February edition of Marine Money it was stated that Danaos Holdings Ltd want to see strict but fair terms for the entry of ocean going shipping companies on the Athens Stock Exchange. It was misleadingly stated however that the company wanted these terms to be strict enough only “to permit the top 10 – 15 companies access to the ASE”. Danaos Holdings Ltd state that the terms should be strict enough to permit only the financially strong companies access to the exchange, of which there may be, in the opinion of Danaos, between 10 and 15 such companies. We should have been more clear and apologize for any misunderstanding.

HIGH YIELD

NAVIGATOR GAS

At the January 25th meeting, the management of Navigator Gas promised that it would provide bondholders with correspondence with the Trustees for the bonds including a legal opinion from Thacher Proffitt & Wood stating that the sale of Bjorn Aaeserod’s holding companies to the Artic Gas interests did not constitute a change of control under the Indenture Agreement. The tripping of such a change of control provision would most recently result in the bonds going into default as current equity interests would be unlikely to refinance all $304 million of the bonds at the change of control price of 101. After another frustrating month of silence, an unspecified number of bondholders took matters into their own hands and contacted the U.S. Trust Company, trustee for the First Priority Notes asking for the Trustee to further investigate the matter. The Trustee in turn contacted its legal counsel, Carter Ledyard & Milburn. Freshly Minted understands that Artic Gas interests flew to New York for a meeting with Carter Ledyard. Neither the context of the meeting or its results have been made public.

Although one would have thought that there was a well-developed body of case law on this subject, Freshly Minted would not be surprised to see Carter Ledyard rule in favor of the company. As always with Navigator nothing is ever clear cut. The only thing that we do know for sure is that the first vessel will not be delivered in the month of March. Against this backdrop it is worth noting that Greek-based gas tanker specialist, Naftomar is in discussions with Hyundai to built a 22,000 cbm LPG tanker for delivery in 2002 at a reported $32MM with an option for a second ship. Continue Reading

Freshly Minted – March 9, 2000

Correction:

Danaos Holdings Ltd

In the article published in the February edition of Marine Money it was stated that Danaos Holdings Ltd want to see strict but fair terms for the entry of ocean going shipping companies on the Athens Stock Exchange. It was misleadingly stated however that the company wanted these terms to be strict enough only “to permit the top 10 – 15 companies access to the ASE”. Danaos Holdings Ltd state that the terms should be strict enough to permit only the financially strong companies access to the exchange, of which there may be, in the opinion of Danaos, between 10 and 15 such companies. We should have been more clear and appologize for any misunderstanding.

HIGH YIELD

GOLDEN OCEAN

In our view, one of the most interesting things to happen in ship finance this week involves a surprisingly small sum of money. But if our hunch is correct, the $5 million that Frontline paid for $50 million face value of Golden Ocean notes represents the “ante” in a much larger wager and one that could have a substantial impact on the landscape of the VLCC market. In our view, while Stena and Bergesen have pulled a few tasty meaty morsals from Golden Ocean, Frontline’s decision to voluntarily buy bonds, roll-up its sleeves and get involved in the Golden’s hard fought restructuring gives us the impression that they are interested in taking the whole carcass, flies and all.

FRONTLINE

If there was ever a company that could reap the intangible benefits of Golden Ocean’s size, delivery schedule, fleet and chartering relationships, it is Frontline. While the company has been a relatively late-comer to the Golden Ocean party, in our view that has less to do with a lack of interest and more to do with the fact that Frontline’s Tanker International VLCC pool was still in formation during the early stages of Golden’s on-going restructuring and the company was occupied acquiring ICB. We devote an uncharacteristically large space to this situation below. We hope you find it useful. Continue Reading

Freshly Minted – March 2, 2000

Marine Money Launches Dotcom OnLine Newsletter

“Ocean shipping is the biggest real-time data streaming network in the world. New means for circulating and managing data are hitting the industry like a 30 foot wave.” Wired Magazine, October 1999. Marine Money’s Online news service will be the most significant news resource dedicated to e-business and internet technology for the $2.5 trillion a year global transportation industry. E-mail us now to receive the inaugural issue this coming Tuesday. For more information info@marinemoney.com

TRANSPORT INTERNET WORLD

The internet field is awash with good, bad and ugly ideas and Industry Standard magazine separates the wheat from the chaff. Transport Internet World (www.transportinternetworld.com) an exhibition set for June 21-23 on Pier 92 at the Passenger Ship Terminal on the Hudson River, has already become the transportation industry’s standard and will provide a forum for sifting gold from the sand of transport -related e-solutions. The show is being partly financed by Ionian Ventures, Claire Milonas’ internet VC business, and organized by International Marketing Strategies. Wired Magazine calls ocean shipping “the biggest real -time datastreaming network in the world.” Evolve or face extinction.

HIGH YIELD

Wall Street Term of the Week: “Drink the Kool Aid” The Wall Street term “Drink the Kool Aid” refers to an investor who believes the “story” that a company is telling about its prospects. The origin of the term is the tragedy in which religious zealot Jim Jones asked his devoted followers to drink Kool Aid that was tainted with poison. Most of them did and died. Nevertheless, Drinking the Kool Aid is not necessarily a bad thing. When using this term in public, be careful not to confuse it with the “Electric Kool Aid Acid Test” which is a novel written by Tom Wolfe. Continue Reading