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Safe Shelf
Today, Safe Bulkers, Inc. filed a shelf registration to sell up to $300 million of common stock, preferred stock, warrants and subscription rights. Noticeably absent from the registration were debt securities.
Polys Hajioannou, Chairman and Chief Executive Officer, stated, “While the Company does not currently intend to offer securities registered pursuant to the registration statement, the registration statement provides the Company with greater flexibility to take advantage of favorable market conditions as they may arise.” Legal advisors were Cozen & O’Conner and Cravath, Swaine & Moore. Deloitte, Hadjipavlou, Sofianos & Cambanis provided accounting advice.
No Surprises This Quarter Either
On Wednesday, Dealogic released its Bookrunner and MLA Tables for Syndicated Shipping Loans for the 9 months 2009. As expected, total volume and transactions were well down from the prior year. Total deal volume was $25.6 billion in 85 transactions compared to $72.2 billion in 263 transactions over the same period in 2008, confirming what we hear anecdotally. In percentage terms, the nine-month decline was 64.5%, which was less than the quarter over quarter reduction of 73.9% suggesting relief is not yet in sight.
Looking at the changes in the tables from the first half of the year, there was movement in the bookrunner table (figure 1) as Mitsubishi UFJ jumped from 8th place to 1st on the strength of two NYK deals booked at the end of September. This pushed SMBC into 2nd place. In a similar fashion, ING moved from 9th to 3rd on the back of the Bluewater transaction, while BofA Merrill Lynch, which was not even in the top 20 came out of nowhere to finish in 9th place based upon the Tidewater transaction. DnB NOR and Mizuho rounded out the top five finishers. The data is particularly striking in that 9 banks made the top 20 having done only a single transaction.
The Consolidator Strikes Again
Growth is at the core of every corporate strategy and essentially, companies have the options to grow by either through organic expansion and ramping up their own business activities or collaborating with other industry players. PT Berlian Laju Tanker (“BLT”) is a firm believer of the latter. This week, in another landmark acquisition to expand its footprint in all regions worldwide, BLT announced its plans to launch a voluntary all-share offer for Camillo Eitzen & Co ASA (“CECO”).
BLT is certainly no stranger to consolidation. During the Asian Financial Crisis in 1998, BLT acquired Asean Maritime Corporation which indirectly owned 7 chemical tankers ranging from 3,200 to 7,500 DWT. At that time, the rationale for the acquisition was to accelerate its growth in North Asia. Fast forward nine years later to December 2007, Asean Maritime, which is now BLT’s wholly owned subsidiary, acquired the entire issued share capital of Chembulk Tankers (“Chembulk”) including its 11 chemical tankers ranging from 16,400 to 33,000 DWT. With the acquisition of the world’s 7th largest chemical tanker fleet, BLT had not only strengthened its position as the top intra-Asia chemical tanker operator but also fast-tracked its growth internationally particularly in the western markets where it had a limited presence.
A Call for General Average
Last week, as a consequence of its public disclosure obligations, Danaos Corporation announced that Zim had asked its customers for a 35% across the board reduction in charter hire. In situations like this, one wonders whether public disclosure is a service or disservice. But it does not matter, as it is necessary and essential to the workings of the capital markets.
Zim’s action has unimaginable repercussions for the entire industry. Charter parties, lest any one forgets, are contracts that cannot be unilaterally amended. Ships are built and financed on the expectation of performance of the obligations contained therein. While one could not have anticipated the collapse of the container market, should that allow the liner companies to re-open negotiations and re-structure their commitments? On the other hand, these are extraordinary times. The losses the lines are sustaining are huge and their liquidity is evaporating. How long can they survive?
Back in the Saddle
After what we perceived to be a long absence, we were pleased to see the return of Justin Yagerman at his new desk in Deutsche Bank. Mr. Yagerman leads the transportation and shipping team that includes Robert Salmon and Michael Webber. Coverage includes trucking, airfreight, logistics, railroads and, of course shipping.
On Wednesday, Mr. Yagerman initiated coverage of the sector. His main takeaway on shipping was: “near-term fundamentals challenging across the board, but high quality names should continue to outperform.”
Notes from the Center of the Shipping Universe
The waters around Singapore are littered with parked tonnage, while the vibrant nation’s skyline grows and changes daily as construction on new office towers, casinos, amusement parks, mass transit projects continues 24 hours a day. There is a dull roar of cranes, jackhammers and steel against steel always in the background.
It is clear in Asia that demand is not likely to be shipping’s problem, as growth numbers indicate a steady rebound of trade, led by China and many of its vibrant Asian neighbors. But as HSH Nordbank’s Mattias Umlauf told a full Marine Money Singapore Week conference crowd the growth while positive only begins to bring us part way back to where we were.
And that is why everything revolves around supply. As a veteran of several slides, we note glumly, but without surprise, the business has returned to the industry’s norm – a supply driven business with generally modest returns.
The question is how long before a semblance of balance between the enormous supply and demand creates utilization rates capable of more than modest returns.
Ticking Time Bomb
Vibrant, bustling Singapore, where shipping is taken very, very seriously, was the backdrop for Marine Money’s 8th Annual Singapore Asia Week conference.
With enough high-rise construction going on to warm the heart of even the most anxious capesize owner, no amount of now well known down market projections could dull the spirit of the nearly 500 delegates from around the world.
The only pall and it came near the end of the conference, and then only as a result of a question from the audience, which was addressed to the panel of leading bankers who admitted the coming end of the year Basle II account reconciliation was indeed a time bomb.
Broader Acceptance
Last week, Navios Holdings announced that it had purchased the Navios Celestial, a 2009-built ultra-handymax of 58,084 DWT from a Japanese shipyard. There was nothing unusual about that except for the fact that the Japanese shipyard accepted $5 million of the total consideration of $36.2 million in the form of mandatorily convertible preferred shares. As a result, the effective purchase price was $33.5 million based upon the $10 mandatory conversion price. The shares carry a coupon of 2%.
Up until now only Korean yards have been willing to accept this arrangement. By gaining broader acceptance, Navios expands its liquidity and ability to finance its newbuilding order book.
And just as interesting and perhaps telling was the company’s decision to employ the vessel initially in the spot market with the intention of seeking period cover at an appropriate time.
Share Sale Completed
On Tuesday, Paragon Shipping Inc. announced that it had completed its second Controlled Equity Offering of 10 million shares achieving an average sale price of $4.11 per share. Together with the first offering completed on June 2nd, the company raised total net proceeds of $83.75 million. Proceeds will be used for future vessel acquisitions. After the completion of this offering the company has 48.2 million shares outstanding.
No Surprise
As a private company no one knew for sure, but given the performance of the publicly reporting container lines, CMA CGM’s announcement on Tuesday that it had reached an agreement on the formation of a “creditors” committee consisting of French, European and international banks, including major financial institutions from Asia and the Republic of Korea, was no surprise. The purpose of the committee is to propose suitable measures to address the group’s short-term and medium term financing requirements with a view to strengthening the company’s capital structure and in so doing ensuring CMA CGM’s future. Given the company’s size and strategic importance, the French state is aware of this initiative and will be kept regularly updated on the progress made.
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