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Open House in the Equity Markets
Having previously done a follow-on offering of 3 million shares back in January, which raised net proceeds of approximately $107.5 million, including the over allotment, Nordic American Tanker Shipping (“NATS”) again seized the opportunity and initially announced on Tuesday, after the market closed, an underwritten public offering of another 3.5 million common shares, pursuant to its effective shelf registration. The company also granted the underwriters a 30-day option to purchase an additional 525,000 shares to cover over allotments. The shares closed at $36.08 on Tuesday. Subsequently, due to investor demand, the offering was increased to 4 million shares with the greenshoe option increased to 600,000 shares. The price was set at $32.00 per share, which reflects an 11.31% discount to the closing price on Tuesday.
Simply Blown Away
On Tuesday, DVB Bank confirmed that it is not only well positioned to survive in this downturn but also to thrive.
The remarkable news was that the bank entered into 39 new transactions in the 1st quarter generating new business volume of EUR 1.12 billion down only slightly from the comparable period last year. The average interest margin on new business reached an all-time high of 344 bps, more than double the 161 bps it earned in the 1st quarter last year. Unfortunately, it still was not sufficient to compensate for higher funding costs and the impact of distortions in the money market. These costs contributed to a 28.7% decline in net interest income to EUR 30.1 million for the period. The decline in interest income was somewhat offset by fee and commission income and advisory fees which increased from EUR 13.5 million in the 1st quarter of last year to EUR 32.9 million for the comparable period in 2009.
Win-Win Swap
Trico Marine Services, Inc. announced on Monday that the company, with the assistance of Lazard Freres, had agreed to exchange the remaining $253 million of its 6.5% Debentures due 2028 for, in the aggregate, $12.6 million in cash, 3.03 million shares of the Company’s common stock and $202 million in aggregate principal amount of the Company’s new 8.125% secured convertible debentures due 2013.
When the Cure Is Worse than the Disease
As part of its Chapter XI filing, U.S. Shipping Partners (“USSLP”) filed on April 29th a Plan Support Agreement, which as its name suggests outlines the terms under which the partnership agrees to use its commercially reasonable efforts to obtain Bankruptcy court approval of the pre-arranged Chapter 11 plan of reorganization and the secured lenders agree to cooperate in that regard.
Under the terms of this agreement, all existing partnership and other equity interests are cancelled and extinguished. The partnership will be reorganized as a Delaware corporation and new common stock and warrants to purchase new common stock shall be issued to the senior secured lenders and the holders of the second lien notes.
Even the Analysts Wonder
We arrived at work last Friday morning to the rather surprising news that DryShips, clearly seeing the opportunity, had once again gone out into the equity market. The company announced its second ATM Equity Offering through Merrill Lynch for up to $475 million of the company’s common shares. Back in January, DryShips had entered into an earlier agreement to sell up to $500 million, which it completed last month selling a total of approximately 95.7 million shares, generating net proceeds of ~$487.5 million after commissions. An ATM equity offering allows the company to issue common shares at any time and at the company’s discretion.
Islamic Money for Ships
Kuwait Finance House Labuan, a wholly-owned subsidiary of Kuwait Finance House (Malaysia) Bhd, will be setting up a Shariah compliant shipping fund together with SFS Group Public Company via a limited partnership by the end of this year.
In a joint statement released this week, both companies said the target fund size is approximately USD 150 million, to be managed by an equally-owned company acting as the general partner based in the Cayman Islands. The objective of the Shariah compliant shipping fund is direct investments in shipping assets with long term charters to top shipping companies. The fund will invest in high quality and modern vessels with a preference for offshore ships such as Offshore Supply Vessels (OSV) and Platform Supply Vessels (PSV) among others. The term of the fund is seven years from first closing with up to three additional one year extensions to allow for an orderly liquidation of its assets. Continue Reading
Options in Distress
What are the options exactly available to shipping companies in distress? In his presentation entitled “Afloat, Abreast, or Ahoy – Be in the Know”, Mr. Lionel Tay from Rajah & Tann LLP gave us his insights as a practitioner who is involved most recently in the Armada (Singapore) insolvency case.
One possible option is a scheme of arrangement that essentially entails a proposal being presented by the company to its creditors. In such an arrangement, creditors may be bound by the scheme to accept payment at a discount. The company’s management remains in place and provides some breathing space to contemplate the company’s future as a going concern. The tricky issue here is the company’s ability to gather enough support from its creditors who account for at least 75% of its total debts. Continue Reading
Law and Order
On the last Friday of April, the Maritime Law Association of Singapore presented its 2nd Asian Maritime Law Conference entitled “Arrest, Insolvency and Pre-emptive Remedies in a Global Shipping Crisis”. The mood was somewhat sombre with many in the audience believing that the shipping crisis is still far from over. The mix of presenters included speakers from both the East and the West and brought great value and interest. Some of the more interesting takeaways for us, in no specific order, including the following:
- IMF estimates that bank losses from US toxic assets could reach USD 4 trillion. If we compare this figure to the global syndicated loan amount of USD 3 trillion in 2008, this is equivalent to one lost year of financial activities. Continue Reading
Bottoming Out?
Over the past week, we have experienced the first market rally from a recession trough. Asian stock markets rallied to some of their highest since mid October as investors take confidence in China’s economic recovery. The manufacturing purchasing managers’ index in China rose from 44.8 in March to 51.1 in April, passing the 50-point mark that separates contraction and expansion for the first time in 9 months.
In a market report published last Friday, JP Morgan presented an optimistic view, suggesting that “we are indeed very close to the bottom in global economic activity, and may already be there, with the world economy set to start expanding again in coming months” but acknowledged that there are still many inherent risks since banks and households are still in balance sheet repair mode and a swine flu pandemic cannot be ruled out. Continue Reading
6th Annual Marine Money Istanbul Ship Finance Conference
On a balmy day over the Bosphorus, Marine Money and Geden Line, our Anchor Sponsor, held the 6th Annual Marine Money Istanbul Ship Finance Conference. A week before delegates had been slow to sign up and we were concerned the crisis was taking it’s toll. But true to form the Turkish shipping community showed it’s solidarity and on Thursday 30th April over 170 speakers and delegates filled the ballroom of the Swissotel – The Bosphorus.
Our keynote address was given by Mr. Suay Umut, President of Dunya Shipping. Getting on in years but young in energy and initiative, Mr. Umut reminded us that this is certainly not the first crisis in shipping, though the total scope of this crisis, incorporating the financial sector as well, is different and more far reaching than past crises. Mr. Umut closed by suggesting an age limit on trading dry bulk carriers, as in tanker shipping, may go some way to protect the long-term interests of the industry.
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