Great Chemistry

On Monday, Odfjell SE signed a 50/50 joint venture agreement with National Chemical Carriers Ltd. (“NCC”) to establish a company in Dubai to commercially operate their respective fleets of IMO 2/3 chemical tankers of 40,000 DWT and above. The vessels will trade in a joint pool carrying chemicals, vegoils and clean petroleum products worldwide, emphasizing the growing exports out of the AG. NCC was established in 1990 and is 80% owned by the National Shipping Company of Saudi Arabia and 20% by Saudi Basic Industries Corporation.

The company will begin operations early next year with 15 vessels of nearly 600,000 DWT, which will grow to 31 vessels over the next 3 years.

Norwegian Bonds Come & Go

Songa Offshore, Wilh. Wilhelmsen and Aker Solutions were a few of the companies, involved in the Norwegian bond market this week. Aker Solution’s NOK 2.1 billion 5 year FRN priced at NIBOR + 4.75% was the largest offering in the domestic market this year, although its parent, Aker ASA, has subscribed to NOK 1 billion of the total issuance. Pricing was highly favorable as the new issue is trading at a spread to swaps 100 bps below the existing 2013 maturity. The company maintained its BBB- rating from Fitch but the outlook was changed to negative.

Wilh. Wilhelmsen ASA successfully pushed out its redemption profile by completing a placement of its own bonds in WWI13 and by “tapping” the same loan, in aggregate, placed a total amount of NOK 560.5 million. The amount issued increased from NOK 800 million to NOK 1 billion and WW’s holdings decreased from NOK 489 million to NOK 129 million. This issue matures in November 2012. With the proceeds, Wilhelmsen bought back bonds amounting to NOK 65 million in WWI11 (July 2010), NOK 75 million in WWI16 (March 2011) and NOK 80 million in WWI06 (May 2011). Pareto Securities managed the transaction.
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Fair Exchange

Last week, Navios Holdings (“Navios”) and Navios Maritime Partners (“NMP”) announced the re-structuring of certain arrangements between themselves. First, NMP agreed to acquire from Navios the leasehold rights to the M/V Navios Sagittarius, a 2006 Japanese built Panamax. The purchase price, $34.6 million, will be funded from cash on hand. The vessel is currently chartered out at $26,125, net per day until November 2018 and is expected to generate annual EBITDA of approximately $5.8 million. As part of the acquisition of the leasehold, the new owners have a purchase option beginning in December 2009 at an initial price of $25.9 million and the AA+ European Union charter insurance.

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Deal or No Deal?

Rumors in the market are rife about a new massive financing arranged for A.P. Moller Maersk (“APM”). According to Dealogic, the banks involved, as is customary, have reported to them that APM has entered into a $6.5 billion 7 year credit facility. In fact, as an industry source suggests, and Dealogic confirms, this is an old deal in the same amount that has been amended. And, as such, there is no new money involved.

In a precautionary move, given the uncertain credit markets, the amended transaction has been structured as a forward start facility. Upon expiry of the existing facility, the new one commences. In this instance, the start date is in 2012. The mandated lead arrangers on both include Citi, Danske Bank, HSBC, JPMorgan, Mitsubishi UFJ and Nordea.

Green Shoots on Wall Street for Shipping

According to recent public comments of bankers and investment bankers, capital markets alternatives are stepping to the fore to finance credit gaps left by cautious or constrained banks. They point to the return of the secondary equity raise as the first indication of a reawakening equity markets.

In 2008, there were a total of 219 secondaries on NASDAQ and NYSE, raising almost USD 113.5bn. This year through the end of May, there were 172 secondaries on NASDAQ and NYSE, raising almost USD 81bn.
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Morgan Stanley II

Despite a pressing deadline, we couldn’t pass up the opportunity to get out of the office and attend Morgan Stanley’s 2nd Commodities and Shipping Conference. In these difficult times how could one possibly forego the opportunity to hear what Ole Slorer and his team have to say with the added benefit of gleaning some insights on the capital and lending markets. All interspersed with company presentations and lessons from Morgan Stanley’s commodities and freight trading experts. It is a rare opportunity for us to receive an invitation to these investor only meetings and we are most appreciative. Putting on an investor hat for a moment, we can confirm that if one is interested in the space there is no better way to get an education and gather information about this sector than attending these conferences. And, we did not even benefit from having a one-on-one meeting.

Wiley Griffiths, the Head of Global Shipping, and his team started us off with a view of what was happening in the market. Continuing historic trends, the markets as always remain interesting.

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Notes from Japan

We had a lot of talk at Marine Money’s 4th annual Japan Ship Finance Forum last Tuesday about strategies on strengthening balance sheets and managing vendor relationships to understanding one’s rights and remedies in contractual disputes. The strong support shown by over 150 delegates is a tribute to the Japanese shipping industry and its ability to manage the global financial crisis and shipping market downturn to achieve long-term success. We present some quick notes from the event. Continue Reading

Japanese Shipowners in Rough Waters

Not too long ago, Japanese shipowners were able to secure cheap financing at 90% financing or even 100% financing from the Japanese banks so long they have a long-term charter with one of three mega carriers. But this is no longer the case today when Japanese banks continue to grow cautious and tighten their lending capacities towards the domestic shipping industry.

During the bankers’ panel discussion at Marine Money’s 4^th Annual Japan Ship Finance Forum, Mr. Yohei Ugari, general manager of the ship finance department at SMBC, shared with the audience that Japanese mega banks are no different from their Western counterparts and are constrained by their capital-adequacy ratios. At the same time, Japanese shipowners are facing their own set of challenges especially in generating stable cash flows due to the significant appreciation of yen over the past few months. Traditionally, shipowners in Japan are highly leveraged and have enjoyed the low interest yen denominated loans. But it is also this preference for yen denominated loans that exposes them to considerable exchange rate risks, arising from the mismatch in currencies between revenue and expenses. Continue Reading

Fun Raising Continues

As economists struggle to reach a consensus on whether the global economy has indeed begun a sustainable recovery or this is simply a slower pace of contraction, investors are just befuddled by the strength and endurance of the present stock market rally. But one thing is for sure, shipping companies are wasting no time in taking advantage of this broad-based improvement in market sentiment.

In Japan, Mitsui O.S.K. Lines (“MOL”) issued two series of secured straight bonds – bonds number 11 and bonds number 12 last week and raised over JPY 50 billion (USD 528 million). The first tranche of five year JPY 30 billion bonds carries an annual coupon of 1.278% while the second ten year JPY 20 billion tranche pays investors 1.999% annually. The funds will be used to repay existing borrowings and for the redemption of commercial paper. Both Rating & Investment Information and Japan Credit Rating Agency have assigned AA- to the bonds, acknowledging that the company’s well diversified earnings have a strong capacity to recover in a market turnaround. The bonds, although unsecured, come with a negative pledge. At the same time, the company is said to be in the market for a three year JPY 15 billion (USD 156 million) loan with SMBC as the sole bookrunner. The loan is priced at 30 bp over 6-month TIBOR (Tokyo Interbank Offered Rate). MOL expects some signs of recovery in summer this year and is implementing its JPY 40 billion group-wide cost reduction measures to secure stable long term profits. The ability to secure incredibly low cost funding and execute rapid fleet reduction will prove to be critical for the company emerge stronger in face of the crisis. Continue Reading

Who are the Winners in Bankruptcy?

The following list was extracted from the Notice of Filing of Updated Master Service List filed on May 26th by the counsel to U.S. Shipping Partners L.P.:

Chapter XI is a wonderful process. You need to restructure because you can’t meet your obligations and yet somehow you have to borrow money to pay the lawyers to get through it.

On the back of an envelope we calculated the following:
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