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Denouement
The Aries Maritime Transport Limited (“Aries”) story begins anew. Last week, Aries entered into a securities purchase agreement with Grandunion Inc., a company controlled by Michail Zolotas and Nicholas Fistes, pursuant to which the company has agreed to acquire three capsize bulkcarriers, with an approximate net asset value of $36 million in exchange for 18,977,778 shares. A description of the vessels being acquired is shown herein.
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A Bellwether?
The bond market is getting better. As we saw with the Hornbeck bond last month, spreads and trends are improving. The economy seems to be bottoming out and with an improving economy and inflation fears increasing interest rates should follow. The timing for an offering seemed propitious then as it does now.
It was therefore no surprise that Seacor Holdings Inc. (“Seacor”) became one of the first NY-listed “shipping” companies to issue bonds this week when it priced and sold $250 million of 7.375% Senior Notes due in 2019. The issue was priced at 99.239% to yield 7.471%, reflective of the current market and at a much better rate then would have been achievable 6 months ago. This equates to 400 bps spread over like term Treasuries. The issue was well received and several times oversubscribed and despite requests to upsize the deal, Seacor was satisfied at the current level.
Back to the Well
Utilizing its $500 million shelf registration from February, Navios Maritime Partners (“NMP”) went back into the market last week for its second follow-on offer of this year. In May, NMP issued 3.5 million shares at a price of $10.32. Last week’s offering of 2.8 million shares was priced $12.21 per share a discount of 6.5% from the prior day’s closing price. Proceeds will be used to fund its fleet expansion and/or for general corporate purposes.
New Project & Structured Finance Partner for Watson, Farley & Williams Singapore
The Singapore office of Watson, Farley & Williams LLP (“WFW”) is pleased to announce that Mehraab Nazir, a structured asset and project finance specialist, has moved from the London office of WFW to join the Singapore office as a partner in its International Project & Structured Finance Group.
Mehraab advises on all aspects of structured asset and project finance related matters particularly with regards to aviation and in the renewables, power and energy space. His recent asset experience includes: advising banks and large corporates on acquisitions and disposals of a number of “big ticket” aircraft and other leasing companies and advising lessors, lessees and manufacturers in relation to cross-border operating lease transactions, as well as advising on debt financing, joint ventures, insolvencies and restructurings. Mehraab’s recent renewable energy experience includes: acting for a lender on the refinancing of a UK onshore wind farm, advising the lenders on the financing of a European offshore wind farm, advising the prospective purchaser of a UK offshore wind farm and acting for the developer of a portfolio of solar thermal power and photovoltaic plants.
Order Restored
It happened: Beautiful sunshine in Hamburg, a perfect lawn to play football, almost 200 excited spectators at the sidelines and the bankers did it – after four painful years, they finally won again.
After five minutes, it was clear: Lehman Brothers was enough of a disaster for the financial world; no further embarrassment would be accepted. The shipowners’ regular matchwinner, striker Christian Kockentiedt from Intersee, found himself three times painfully fouled. The owners’ team, in the average roughly 15 years older than the bankers’ team did not manage to overcome the defense centered around Hypovereinsbank’s Oliver Trennt. Had the banks only been as solid in securitizing loans …
The Importance of Relationships
D/S Norden announced this week, that it had mutually agreed with the counterparty to cancel, without cost, the long-term chartering of four Post-Panamax newbuildings, which were scheduled for delivery in 2010 (Q2 and Q3) and 2011 (Q1 and Q3).
The vessels were originally chartered in June 2008 at an average charter rate of $35,750 per day for three years. As a consequence of this agreement, the average cost of the dry cargo fleet is reduced by $1,000 per day over the 3-year period, which equates to a savings on a present value basis of approximately $60-70 million at today’s forward rates.
The company still controls eight Post-Panamax vessels (4 owned and 4 long-termed chartered), which will be operated together with 8 other units, leaving the company with a strong market position at a competitive cost. Without these four vessels, the average cost in this vessel type will be halved.
In these times, cost cutting is also an effective means of making money.
Norwegian Bonds Following the Pattern
History does repeat itself. In the latest Corporate Credit Report by Nordea’s Lars Kirkeby, we noted an interesting relationship between spreads and default rates, which Mr. Kirkeby was kind enough to expound upon.
High yield industrial credit spreads have declined sharply from their highs earlier this year. The single B spreads have declined from 1300 bps to 762 bps, while BB declined from nearly 700 bps to 300 bps. This is reflected also in the iTraxx 5-year crossover Index of high yield CDS, which has declined from an all-time high of 1,150 bps in March to an average of 601 bps in August. The trend appears to be continuing as the August average spread represents a 15% tightening from July’s 704 bps.
While spreads are in decline, defaults are on the rise. So far in 2009, 201 public rated high yield issuers have defaulted, affecting debt worth $453 billion. This compares to the full year 2008 in which 126 issuers defaulted affecting debt worth $433 billion.
Euroseas and Citi Join Forces
About two weeks ago, Euroseas, utilizing its existing shelf registration, entered into a continuous offering program equity distribution agreement (“COPED”) with Citi to sell up to 7 million shares of common stock from time to time through Citi as a sales agent. Under the terms of this equity distribution agreement, Citi may act as a principal and purchase shares at a price agreed upon at the time of sale. For its services Citi will be paid a commission of 2% of the gross sales price. Proceeds will be used for general corporate purposes and to fund vessel acquisitions.
Since the transaction was announced on September 4th, the share price has steadily risen from $4.40 to 4.76 on average volumes of about 96,000 shares.
When It Rains It Pours
If $500 million in new capital wasn’t enough, the trustee of the NOK 2 billion 9.75% Petromena bond informed Seadrill Limited that the bond would be partially repaid. Accordingly, Seadrill, which owns 81.1% of the issue, anticipates receiving $104 million, which will increase the company’s dividend capacity in the 2nd half of 2009. Perhaps, this windfall is the reason for the reduced amount of the convertible bond.
Seadrill Taps Bond Market
Last week, Seadrill successfully completed the offering for a five year $500 million senior unsecured convertible bond. Although the books were oversubscribed beyond the original $600 million offering, Seadrill opted to cap the sale at $500 million.
The bond was priced at par to yield 4.875% and will mature in September 2014. The conversion price is $25.18, a 35% premium to the VWAP of the shares on the date of pricing. Given the run-up of the share price (94% YTD), the bankers balanced the two by pricing the offering at the high end of the yield while providing a lower conversion premium.
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