Links
marinemoney
SeaCube’s Shelf
Also, just before the holidays, SeaCube Container Leasing Ltd announced the filing of a universal shelf registration to sell up to $75 million of securities, which could include common or preferred shares, debt securities, warrants, subscription rights, purchase contracts, purchase units or any combination thereof. In addition, the company registered up to 8.525 million shares owned by an affiliate of Fortress for sale in a secondary offering to take place sometime in the future. Proceeds of the primary offering will be used for working capital and general corporate purposes which might include the re-payment or refinancing of outstanding indebtedness and the financing of future acquisitions. The filing was effective as of December 30th.
Build, Borrow and Extend – Scorpio Covers the Bases
Surely, Scorpio Tankers Inc. waited until all the pieces were in place before announcing a multitude of transactions just prior to the holidays. To begin, the company announced that it had contracted with Hyundai Mipo Dockyard to construct the sixth of a series of 52,000 DWT MR product tankers, with new propulsion technology, for a price of $36.4 million with delivery in January 2013. This follows the order for five sister vessels placed at Hyundai back in June for approximately $37.4 million with delivery scheduled between July and October 2012. This latest contract also contains options for a further three vessels of the same specification. Declarable in mid-January the first option is exercisable at the same price. Should the company exercise the first option, it has a second option, which must be declared in mid-March 2012 for the construction of a further two vessels at a slightly higher price of $37.2 million each.
NewLead Sheds Assets
Less fortunate was NewLead Holdings Ltd with its mixed fleet of tankers and dry bulkers. While a sound strategy, its levered balance sheet and lack of liquidity could not withstand the abysmal tanker market. With limited options, the company and the bank syndicate led by the Bank of Scotland agreed to sell its four LR1 product tankers with the banks agreeing to accept the net sales proceeds in full satisfaction of all amounts owed under the loan agreement. The sale of two of the vessels occurred on December 22nd with the sale of the other two expected to take place this month. As a result, NewLead’s indebtedness will be reduced by $147.9 million to $437.5 million, which will encumber a remaining fleet of 14 dry bulk vessels, including one handysize under construction and two handymax product tankers. This was a huge step in a process that continues.
Genco Amends its Agreements
Just before the holiday break, Genco Shipping & Trading Limited announced it had separately amended its $1.4 billion revolver, its $253 million senior secured term loan facility and its $100 million term loan facility led respectively by DnB NOR, Deutsche Bank and Credit Agricole. The parties have agreed to waive both the maximum leverage and interest coverage ratio covenants through the quarter ending March 31, 2013. During that interim period, a new covenant which limits interest bearing consolidated debt to 62.5% of the aggregate of interest bearing debt plus consolidated net worth will be tested. In this instance the quid pro quo was the prepayment of the loans to the tune of $62.5 million of which $52.5 million was allocated to the $1.4 billion facility, $7 million to the $253 million facility and $3 million allocated to the $100 million facility. The banks also took their pound of flesh charging an upfront fee of 25 bps on the amount of the outstanding loans and applying the proceeds in inverse maturity. In addition, the $1.4 billion revolver is subject to a 200 bps facility fee payable quarterly on average daily outstanding loans, which reduces to 100 bps upon completion of an equity offering of a minimum of $50 million. Albeit expensive, this is yet another example of a company, having the wherewithal, taking the lead and managing the process to achieve a level of certainty despite the difficult markets.
Risk Off? – Frontline Closes within its Self-Imposed Deadline
While not a joyous conclusion to the year, the announcement of the successful completion of the restructuring of Frontline does at the very least bring a sigh of relief to all the parties involved. While we have covered the details of the transaction in prior issues, we would highlight the following key elements.
The newly formed “risk” tanker company, Frontline 2012 acquired five VLCC newbuilding contracts, six modern VLCCs, including one time charter and four modern Suezmax tankers from Frontline for $1.121 billion based upon fair market values. In addition, the new company assumed $666 million in debt associated with the vessels and newbuilding contracts as well as $325.5 million in remaining newbuilding commitments. Based upon a year-end book value of $1.428 billion, Frontline will incur a book loss of $307 million.
Triage in the Trough – Advantaged Alternatives in International Marine Insolvencies
By Jovi Tenev, Holland & Knight LLP
–The author gratefully acknowledges the assistance of his partners
Nancy Hengen, Brad Berman, Jim Hohenstein, and John Monaghan.
For an industry characterized by as much financial volatility and extreme cyclicality as international shipping, it seems rather remarkable that, historically, relatively few international shipping companies have sought bankruptcy protection in the United States. The increasing recent US bankruptcy filings by international shipping companies may signal a maturing of how this industry treats financial distress, perhaps now finally following an approach to insolvencies, quite common in other businesses, that is more orderly, holistic and can maximize value.
Build It, But Will They Come?
Port Development as a Harbinger of Growth in Shipping and the Gamble Ports are Making
By Alfred J. Kuffler1, Montgomery McCracken Walker & Rhoads
For a very long time, now, the news unrelentingly reports financial disasters – plunging freight rates, collapsing vessel values, failing companies, laid up vessels by the hundreds, and the demise of numerous shipping ventures.
But, though cold comfort to those who have seen the recent economic cycle destroy their fortunes, for the longer term, port development projects already under way and those in the planning stage are based on forecasts of increased trade and therefore substantial growth in ocean transportation.
At least in the United States, a sure sign of long-term growth may be found in port development projects concentrating on container traffic. This segment of the industry accounts for about one third of the waterborne export and imports in the US Deutsche Bank’s RREEF division produced a study in April 2009 cataloguing major port expansion projects in Hampton Roads, Virginia, Savannah, Georgia, Miami, Florida, New Orleans, Houston, Oakland, Tacoma, and Seattle as well as Prince Rupert and Vancouver, British Columbia. The same paper reported industry projections that U.S. west coast container shipments would triple in twenty years. Likewise, the Port of New York and New Jersey is projecting a doubling of container volume by 2020. The writer can add that the Delaware River is witnessing similar development under the aegis of the Philadelphia Regional Port Authority which is overseeing $600 million of development on the Philadelphia side of the river while New Jersey is developing a facility from scratch in Paulsboro.
Containership Size Trends and Lessons from the Airlines
By Peter I. Keller, Peter I. Keller & Associates LLC
The debate over vessel sizing has been intensifying, especially as we consider the expanded capability of the Panama Canal in 2014 and the current order book.
We would venture to say there were many that said the early C4 conversions of Sea-Land that carried 360 35 foot containers were too large and the “jumboized” version of the C4 with 620 boxes was akin to commercial suicide. Today the debate rages on, as carriers now consider the 20,000 TEU threshold, although one can presume it has been virtually crossed with the 18,000 TEU vessels currently on order.
How big is big enough and how big is too big? Within the industry the justification for larger is basically premised upon slot cost economics and the fuel cost per slot. Many argue that the increase in fuel costs outweigh capital costs associated with new, larger vessels. While this makes some sense on the face of the argument, have these carriers also considered the capital costs associated with building larger terminals, bigger cranes and deeper harbors? When considered in its entirety, the costs far exceed the cost of the vessel. Have lines really considered the questions of productivity at terminals and the ability to accumulate and then vacate 8-9,000 individual container units to and from a pier facility in a matter of days? How about the millions and billions for road and rail infrastructure to support dollar savings in cost per container for the vessel and fuel?
Delivering Long-Term Results
By Dudley Holt
As the books close on a year of bankruptcies and restructurings, we should not lose sight that some maritime transportation companies continue to thrive, and for these companies the current market conditions present opportunities for accretive growth. One such company is Kirby Corp, a Houston-based company that has created significant shareholder value. An investor who purchased a share of Kirby 20 years ago would today have an IRR of 15.37% based on the December 16, 2011 closing price of $63.36. Growth through acquisition has been a significant driver, but at the heart of the Company’s success has been a disciplined acquisition strategy and a commitment to maintain a prudent capital structure to handle volatility and survive pro-longed downturns. For insight on how the company has achieved its success, we spoke with Kirby’s CEO, Joe Pyne, who has been with Kirby for more than two decades. His comments were enlightening.
First, for those not familiar with Kirby Corporation, some background: Kirby is publicly listed on the New York Stock Exchange under ticker KEX. The company’s market capitalization was $3.45 billion as of December 14, 2011 is with total revenues of over $1.1 billion in 2010, derived from two business segments. Kirby Marine, which is focused on the transportation of bulk petroleum liquids with tank barges along the US inland and coastal waterways and accounts for 65% of 2011 estimated revenues, and Kirby Engine Systems, focused on diesel engine services and remanufactured parts, and ancillary products, which accounts for 35% of 2011 estimated revenues. Kirby is the largest tank barge operator in the US (by fleet size), and through its diesel engine services segment, the company is the leading after-market service provider for medium and high-speed diesel engines, also acting as a distributor and servicer of high-speed diesel engines and related equipment. In this segment Kirby also manufactures oilfield service equipment, including hydraulic fracturing equipment, for the land-based pressure pumping and oilfield services markets.
Shipping Restructurings: Is Alternative Capital the Solution?
By David Hilty, Bruce McDonald and Gavin Kagan, Houlihan Lokey
Shipping companies are facing headwinds from low day rates and lack of abundant credit from traditional capital sources. This article will review the situation, help identify alternative capital sources and discuss their propensity to invest in the sector.
Where are we now? Day rates are very low and have been so for some time. This has caused certain companies to be confronted by pending liquidity pressure while traditional capital sources such as bank financing and public capital markets are unfortunately not readily available. Numerous shipping companies are therefore seeking alternative sources of capital.
The Official Guide To Marine Finance Providers
Shipping Index
