Ezra and Swiber Place Out New Shares for Growth

On March 9, Ezra Holdings entered into a placement agreement with Credit Suisse and DBS in order to issue 110 million new shares at a price of SGD 1.10 per share, a discount of approximately 8.4% to the weighted average trading price of shares the day prior. The anticipated SGD 118.8 million (USD 94 million) in net proceeds would be set aside for general working capital and general corporate purposes and/or business opportunities, strategic investments, joint ventures and/or the paying down of existing debt and/or capital expenditure or acquisition of vessels. According to DNB Markets, while the share placement was priced fairly attractively for both the company and investors, existing shareholders would have to face dilution of 11%.

Meanwhile, fellow offshore services firm, Singapore listed Swiber Holdings, had also proposed to a placement of up to 101.07
million new shares at SGD 0.635 each six days after Ezra’s announcement. The placement price represented at a larger discount of 9.74% to the volume weighted average trading price the day prior. The anticipated net proceeds of SGD 62.5 million (USD 49 million) would be used to finance the general working capital requirements of the group. Religare Capital Markets (Singapore) is the appointed placement agent.

Marco Polo Seeks Jakarta listing for Indonesian arm

Singapore listed Marco Polo Marine has announced plans to list its 49% owned subsidiary PT Pelayaran Nasional Bina Buana Raya (“BBR”) on the Jakarta Stock Exchange. The objective is to “make BBR a financially self-sustaining enterprise and one of the avenues to achieve that is to seek a listing of BBR on a reputable regional stock exchange.” PT OSK Nusadana Securities have been appointed as the manager and lead underwriter for the fund raising exercise. Marco Polo Marine cautioned its investors that there is no assurance on the success of the proposed listing and did not reveal the target amount to be raised from the IPO.

Hi Investment & Securities Rolls out New Shipping Fund

Following the success of its first two shipping funds, the affiliate of Korean shipbuilder Hyundai Heavy Industries – Hi Investment & Securities will be rolling out its third public shipping fund “Hi Gold Ocean 3” from February 27. The fund will be offering 16.1 million shares at KRW 5,062 apiece to raise gross proceeds of KRW 81.7 billion (USD 72.5 million) for the acquisition of two 57,000 dwt supramax bulkers. Kukje Maritime Investment Corporation has been appointed as the lead manager while Hi Investment & Securities will underwrite the offering.

The supramax vessels were ordered at Jiangsu Hantong Ship Heavy Industry in China last year, at a price tag of USD 29.4 million per vessel. The first ship is expected to be delivered in April and the second in August. Upon delivery, the vessels will be placed on five year charters with Hyundai Merchant Marine (“HMM”) and SK Shipping respectively and will each provide the fund with an expected charter revenue of USD 81.5 million. In addition, HMM and SK Shipping have the options to extend the charters for another two and four years respectively. Investors can look forward to a non-guaranteed 7% annual dividend.  Continue Reading

KCC sells USD 601 million stake in Hyundai Heavy

Korean construction materials manufacturer KCC Corp has reduced its stake in Hyundai Heavy Industries (“HHI”) from 6% to 3%, in a
block sale arranged by sole bookrunner J.P. Morgan. KCC eventually sold 2.49 million shares in the world’s largest shipbuilder at KRW 280,000 (USD 242) a piece, priced at the top of this indicative price range between KRW 271,500 and KRW 280,000. The final price represented a 3.9% discount to HHI’s closing price on 12 January 2012.

Shares of Hyundai Merchant Marine (“HMM”) soared 4.35% last Monday on market rumours that KCC Corp could use proceeds from its HHI block sale to pick up a stake in the shipping company as the family feud of Hyundai Group shows no signs of receding. For many years, HHI and the Hyundai Group have been fighting each other for control of HMM, the flagship entity of the Hyundai Group. KCC is widely seen as a major ally of HHI.

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Unitholders Approve PST Delisting

Pacific Shipping Trust (“PST”) is a step closer to making history as the first shipping trust to be listed and delisted from the Singapore Exchange. In early October, parent company Pacific International Lines proposed to buy up the remaining 40 percent shares in PST. PIL offered 43 US cents in cash per unit, representing a 14.7 per cent premium over the last-traded price of 37.5 US cents at the point of the announcement.

On December 16, 2011, PST unitholders voted in favour of the delisting that was conditional upon an approval of at least 75 per cent of the total number of issued units held by the unitholders present and voting, on a poll, either in person or by proxy at the extraordinary general meeting (“EGM”), with not more than 10 per cent objecting. At the time of offer, PIL was already holding in excess of 75% of the total number of units at the time of offer. The challenge was to convince minority unitholders that the offer price was fair and the delisting was to their interest. Continue Reading

Swiber Tests Market Demand for Perpetuals

Lacking of good alternatives to park cash in, high net worth individuals in Asia who want to remain invested in today’s volatile market are turning to corporate bonds and potentially perpetual securities for higher yields. And Singapore listed Swiber Holdings wants to take advantage of this positive market development. Last week, the offshore oil and gas services provider started marketing its proposed offering of SGD 50 million (USD 39 million) perpetual preference shares with an indicative 8% dividend. This follows shortly after the successful closing of its plain vanilla SGD 60 million (USD 47 million) 5% one year debt raised under its SGD 500 million Multicurrency Medium Term Note Programme, established by sole bookrunner DBS Bank in July 2010.

This time, Swiber is selling perpetual preference shares in lots of minimum SGD 250,000 to private bank clients. Investor demand for this relatively new investment instrument was reportedly lukewarm, despite the fact that the shares pay investors an annual dividend of 8% and an extra 2% dividend if the shares are not called in the third year. In the event of default, further protection comes from an additional 2% dividend to the investors and the option to convert into ordinary shares if the company defers a second dividend payment or defaults on dividend payment. Continue Reading

Courage Marine Completes Dual Listing

Last Friday, Taiwanese dry bulk owner Courage Marine completed its dual listing process in Hong Kong, six years after its IPO in Singapore. Although no additional proceeds were raised through this exercise, the management believes that the dual listing would provide ready access to these different equity markets in Asia Pacific region when the opportunity arises. More than 60% of the company shares were transferred over to the Hong Kong Stock Exchange prior to the dual listing. China’s second-biggest publicly traded brokerage Haitong Securities was the appointed securities house for the secondary listing.

Courage Marine owns and operates nine dry bulk vessels, including one Capesize vessel, four Panamax vessels, two Handymax vessels and two Handysize vessels with a total carrying capacity of approximately 577,000 dwt.

Pacific Shipping Trust Seeks Delisting

The Singapore shipping trust sector suffered a major setback this week after forerunner Pacific Shipping Trust (“PST”) announced intentions to voluntarily delist from the Singapore Exchange. PST was listed way back in May 2006 amid fanfare and was touted as a new attractive asset class in the form of a “maritime annuity” for investors. But after years of lacklustre share performance and lukewarm investor appetite, its parent company Pacific International Lines (“PIL”) has decided it is time to call it a day.

PIL cited the need for greater operating flexibility as one of the reasons for PST’s delisting. PST’s growth potential has been hampered by the need to benchmark any potential acquisition against its distribution yield and making sure that any acquisitions are accretive to unitholders. This is difficult to accomplish in reality because the distribution yield is a function of the prevailing trading prices of the units and the lacklustre share performance over the years has made it challenging for the shipping trust to source for yield accretive transactions. At the same time, the amount of debt that PST can take on for each acquisition is limited by and subject to credit, debt service and prudence considerations. The delisting will also eliminate the costs of compliance with the listing rules and regulations, allowing PST to focus its resources on its business operations. “PST as a non-listed entity will have greater operational flexibility to pursue opportunities and make investment decisions without being constrained by market-based yield expectations, market sentiment and price volatility,” PIL said. Continue Reading

Swiber Seeks Shareholders’ Mandate for Preference Shares Issue

Perpetual securities are uncommon in Asia, but this has not deterred a number of offshore services companies in Singapore from looking into tapping this source of liquidity. Singapore listed offshore services firm Swiber Holdings is seeking shareholders’ approval to allot and issue convertible preference shares, which if converted in full into conversion shares at the conversion price, will not result in the issuance of not more than 40% of the enlarged share capital of the company.

Preference shares belong to a hybrid investment class, which is senior to common shares but are subordinate to bonds. Analysts generally perceive preference shares as a loan to the company, because preference shareholders are not entitled to normal voting rights but are entitled to dividends. In Swiber’s proposed issue, the company is offering convertible preference shares that provide investors the option to exchange for a predetermined number of the company’s common stock. A convertible preference share has features similar to a convertible bond. The differences lie in that preference shares are subordinated to debt of the issuing company and are usually perpetual securities with no maturity date.

Dividends to Swiber’s preference shareholders are cumulative and payable semi-annually at a fixed rate per annum, and there is a built-in dividend step up which may be activated upon events such as the deference of dividends. The issuer may, at its sole discretion, choose to defer dividend payment to the next dividend date. However, during this period, the dividend stopper will kick in and the issuer will not be allowed to declare or pay any dividends, or repurchase or redeem shares ranking junior to the preference shares.

Preference shares are and are not redeemable at the option of the preference shareholders. The issuer has the right but not the obligation to redeem the preference shares on any stipulated optional redemption date, occurrence of a tax event (any change in any tax law or regulation in Singapore) or occurrence of an accounting event (any change in the accounting standards applicable to the company). For the benefit of preference shareholders, preference shares are convertible into fully paid conversion shares during the conversion period. This means that there could be an increase in the number of shares outstanding in the future, and may be earnings dilutive to the existing shareholders. We expect more details to be announced at a later date.

Swiber intends to distribute the preference shares to institutional and accredited investors on a private placement basis and proceeds will be used for general working capital and capital expenditure.

Business as Usual for Now

Shipowners in Asia are bracing for the potential negative repercussions from the worsening banking crisis in Europe. After all, it was not too long ago when the lack of trade finance caused the BDI to plunge to a low of 663 points on 5 December 2008. Thankfully, a quick check with a number of commodity traders has suggested that the situation is still healthy on the ground. Trade finance is still available and cargoes are moving.

Even so, there are increasing worries that the major European shipping banks might no longer be able to continue provide funding to the shipping industry. Financial institutions in Asia and elsewhere have been reducing credit lines and exposures to European banks in the recent months and this have forced many European lenders to swap lines offered by the European Central Bank for US dollars. Bank of China for example is said to have stopped the counterparty dealings with several European banks. And if more banks are to follow suit, European banks will find it even more difficult to raise US dollars due to concerns over counterparty credit risks. Anxiety about the European debt crisis is driving up sharp spikes in the credit default swap spreads on major shipping banks, suggesting that the markets are increasingly cautious about the credit prospects of these lenders. Continue Reading