Still Many Moving Parts

Eitzen Chemical is now on firm footing. Newbuilding commitments are gone and the company’s finances with the banks and bondholders have been restructured. The requisite private placement of equity was successfully completed last month raising approximately $115 million and the subsequent share offering of approximately $15 million is on-going ensuring reasonable liquidity.

As Terje Askvig, CEO of Eitzen Chemical notes,  “we are confident the robust financial platform following the restructuring, coupled with the company’s modern fleet and strong market position will be a solid basis for creating shareholder value and safeguarding our various stakeholders going forward.” With 2010 expected to be a tough year again, this is a good thing.
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In-N-Out

Those of you who may have traveled in the western United States may have come across a fast food chain called In-N-Out Burger, which was California’s first drive-thru hamburger stand. The image is rich, particularly these days. Can you imagine an In-N-Out investment bank with clients pulling up and leaving with boatloads of cash? But in this instance, the In-N-Out refers to the Golden Ocean Group convertible bond offering that was announced Tuesday morning and pulled later that same day.

The deal put forth was for $100 million in principle amount of five-year senior unsecured convertible bonds. Pricing was somewhat aggressive, in terms of recently completed deals, with an expected annual coupon in the range of 4.375%-4.875% and a conversion premium of 27.5%-32.5%. Proceeds were to be used to fund the existing shipbuilding program, improve the company’s ability to react to market opportunities and for general corporate purposes.
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A Good Citizen

We should preface this article by stating irrevocably that rumors of the demise of the high yield bond market are patently false. Fund flows have been strong and in fact during last week there was $3 billion done in 9 deals. It is alive and well. NCL and Genmar were successfully completed but First Ship Lease Trust (“FSL”) did not get done and therein lies an interesting story.
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Welcome Aboard!

Last week, MMI Investments L.P. and its general partner, MCM Capital Management, LLC, filed a Schedule 13D reporting that through the intermediation of Robert Cowen, the company had acquired 3.95 million shares of DHT Maritime for approximately $15.6 million. These shares constitute a holding of approximately 8.1% of the outstanding shares. Mr. Cowen on his own behalf purchased 39 thousand shares or less than 1%.
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Taking the Show to Broadway

Navios’ stars Ted Petrone and Mike McClure did have Monday off but spent the rest of the week presenting their company at the Pareto, FBR, Bank of America Merrill Lynch and Capital Link conferences. We can now appreciate why you need a management team with a hundred years of experience. Someone has to be minding the store.
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What’s Long-Term?

We were reminded this week that when looking at private equity, one must remember that it is not a permanent solution but temporal, albeit “long-term”, bridge financing. Not that there is anything wrong with that.
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What’s a Ship Worth?

OceanFreight’s Demetris Nenes presented his company at the Oppenheimer Conference in an unusual fashion, by first asking the question on everyone’s mind with regards to asset prices – what is low? He then built upon this question to answer the inevitable why invest in shipping now.

His basic premise is that one must invest in and not trade shipping as the market is too volatile.
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The New Aries

As expected, the new owners of Aries Maritime Transport have recapitalized and repositioned the company to their own liking. Gone are the containerships, which are to be replaced by the dropdown from Grandunion of four bulkcarriers (2 capesize and 2 Panamax) and two MR product carriers, all of which are employed on time charters. The transaction, valued at approximately $180 million, of which ~$20 million will be paid through the issuance of Aries shares at a price of not less than $2.25/share, a 125% from the recent closing price, with the balance coming from the assumption of debt. In addition, Grandunion eliminated any perception of conflict by also dropping down into Aries its technical and commercial management company, Newlead Shipmanagement.
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Making a Silk Purse Out of a Sow’s Ear

It can be done as Ship Finance International (“SFL”) demonstrated this week. The company had ordered two Suezmax tankers without cover. It subsequently sold them to North China Shipping Holdings (“NCSH”) for $109 million each, which outright sale apparently failed.  Accordingly, SFL went back and restructured the transaction as a bareboat hire purchase agreement or conditional sale.
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Another Merger, Similar Effect

In a masterstroke, another step on the road to consolidation took place when Nordic Tankers (“Nordic”) agreed to acquire parts of the chemical tanker operations of Clipper Group A/S (“Clipper”) with Clipper becoming a major shareholder of Nordic. The transaction is transformational with Nordic evolving beyond simply being a tonnage supplier to a major global owner/operator of chemical and product tonnage. The resulting platform, which now includes strong competencies in commercial and technical management of chemical and product tankers, will be able to meet the challenges that have characterized the market throughout the year as well as provide a base for participating in the consolidation of the chemical tanker market going forward.
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