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The End Becomes a New Beginning Again – TBS Files
Last week TBS International, with the support of its lenders, filed a pre-packaged Chapter 11 plan of reorganization and has obtained most importantly DIP financing of $42.8 million from its existing lenders, Bank of America, DVB Bank, Toronto Dominion Bank and Credit Suisse. Under the plan the company will restructure its secured debt and pay in full the allowed claims of unsecured creditors. The plan is expected to be approved within 60 days. Under the terms of the agreement, all of the company’s operating subsidiaries will be transferred to a new entity that will be principally owned by the lenders, effectively wiping out the existing equity.
What Do They Know? – Teekay Tankers Follow-on
Back in the US, Teekay Tankers on Tuesday announced the sale of 15 million shares in a follow-on offering including a green shoe of 2.25 million shares. The timing was curious. The shipping markets are appalling although the dry market has overtaken the wet side on the downside. Also just prior to that announcement the company announced its Q4 2011 dividend of $0.11/share. Michael Webber of Wells Fargo noted that this was “… below our estimate of $0.12/share and Consensus of $0.17/share… We believe actual street expectations were closer to our estimate (in roughly the $0.12-$0.13/share range), with sentiment around the dividend miss likely more muted than otherwise implied by the Consensus number.” As the level of dividend TNK pays is variable and is based on the rates achieved by its vessels in the quarter, the amount was foreshadowed by TNK’s Q4 dividend guidance for spot rates of $10,000/day each for Suezmaxes and Aframaxes. So while the latter should not be considered a surprise, it nonetheless was not good news heading into a sale.
Norwegian Car Carriers Piggybacks on Prior Issue
Buried in the flood of Norwegian bonds issuance last week, we missed Norwegian Car Carriers utilization of the tap feature in its 5-year NOK 200 million 10.5% senior unsecured open bond issue concluded in September 2010. A tap issue allows borrowers to sell bonds, generally smaller amounts, from past issues. Issued at their original face value, maturity and coupon rate, the bonds are sold at the current market price. This allows the issuer to bypass many of the initial formalities of a bond issuance while avoiding certain transaction and legal costs. In this instance, the company issued NOK 25 million increasing the bond issue to NOK 225 million. The bonds were sold at 95.00% to yield 11.05% in line with the recent indicative price of 95.50%. Proceeds will be used to increase the cash position of the company. RS Platou Markets acted as the manager for the issue.
SinOceanic on the Road
At the beginning of last week, SinOceanic Shipping ASA began marketing its new senior secured bond offering. The bonds were to be issued by Sin Oceanic II AS and SinOceanic III AS, the single purpose ship owners and guaranteed by parent SinOceanic Shipping in order to provide a ring-fenced structure. The company intended to sell $200 to $220 million of 3-year 10% bonds at par. Proceeds, split 50-50, will be used to finance pre- and post-delivery payments owed to the shipyard for the construction of the MSC Altair and MSC Regulus, two newbuild 13,100 TEU containerships scheduled for delivery in February and April. The total amount represents an advance rate of 65-70% of the vessels’ acquisition price of ~$154 million. Equity of approximately $50-$60 million consists largely of subordinated loans from HNA Group Co. Ltd, the parent company, while they wait for the equity markets to reopen. These 2nd mortgage loans have a tenor of three years and are interest only. The interest rate steps-up increasing from LIBOR + 8% in year one to LIBOR + 10% thereafter. To date, HNA has invested $120 million into the business and has a 33% interest.
Let It Pour! – The Window is Open
At least with respect to the shipping/offshore finance world, Oslo, for the moment, is the center of the universe. Since our move into publishing, approximately six years ago, we have never encountered the volume of deals derived from a single source in such a short period. Beginning with Teekay Offshore’s offering on January 16th, the Norwegian bond market has successfully concluded six transactions in the offshore space and has at least two deals including one shipping deal pending. Total volume concluded was NOK 4,450 million equating to approximately $760 million, making it a very successful two weeks. All were floating rate, senior unsecured notes priced in NOK. And not surprisingly, given the currency, the interest came largely from Nordic investors. Moreover, we understand that there are more deals in the pipeline. It should continue to be a very interesting month. We begin our coverage chronologically.
A Work Around – Seller’s Credit
It is obvious that that the best outcome in terms of value is to sell an “old lady” as a trading vessel rather than to scrap it. With their long expected useful lives and easy cargo, car carriers are such viable sales candidates and therefore it is no surprise that the Norwegian Car Carrier’s 51% controlled company, Bergshav Car Carriers K/S, announced the sale of the 1988 built car carrier Hyundai No. 203 as part of its fleet upgrading process. Unfortunately, financing for 24 year old vessels is simply not available. The solution for the company was to offer an interest bearing 30 month seller’s credit, secured by a first mortgage on the vessel. According to its terms, 68% will be paid in 2012, 20% in 2013 and 12% in 2014. The sale, once concluded, will provide net proceeds after repayment of the bank debt of about NOK 40 million. Unfortunately, the company will incur a book loss as the sales price was below book value.
Joining Forces on Two Fronts – Grindrod and Vitol Combine Coal Businesses
Last week, Grindrod Limited and the Vitol Group announced that they have entered into an agreement under which Vitol will acquire from Grindrod a 35% interest in the company which owns the Maputo coal terminal concession for $67.7 million. In addition, Vitol and Grindrod will enter into a partnership (65% Vitol / 35% Grindrod) to combine their respective sub Saharan coal trading businesses.
Pre-Launch – GasLog’s Preliminary IPO Filing
Last week, GasLog Ltd., Peter Livanos’ private LNG carrier company, filed an F-1 as the beginning of the IPO process. While most of the details are blank, the one number provided is the maximum offering price which is indicated to be $350 million.
According to Gary Wolfe of Seward & Kissel, GasLog is an early victim of the SEC’s decision in December to curtail its non-public review process for foreign private issuers that are first time filers. Previously, foreign private issuers had the option of submitting their initial registration statement on a non-public confidential basis. Under the new rule they have to be filed publicly via the SEC’s EDGAR website. As journalists, we have no complaints; however this rule raises issues for new issuers, which we will discuss in a future article.
“That Was Easy” – Prosafe Issues NOK 500 million Bond
As a regular issuer, Prosafe SE knows the ropes, which was evident with the elapsed time between the announced offering and the closing of the books a mere hour and a half. Then too it’s a niche business in oilfield services making it an easy sell these days. In a substantially oversubscribed offering, Prosafe sold NOK 500 million of 5-year senior unsecured bonds. The bonds, sold at par, were priced at NIBOR +3.75%. In connection with the offering, the company bought back NOK 121 million of PRS06 PRO, which bonds mature on October 14, 2013, at 102.87%. At the end of December, those bonds were trading at 101.47%. The remaining proceeds will be used for general corporate purposes. More details on the transaction are included in the Guts of the Deal below.
NAT Raises Equity for Growth
On Wednesday, after the market closed, Nordic American Tankers Ltd. announced the sale of 5.5 million common shares in an underwritten overnight public offering based upon its broad effective shelf registration dated September 28, 2009. The offering was priced today at $14.10/share, a 9.4% discount to yesterday’s closing price of $15.57/share. Total gross proceeds of $77.55 million will be used to strengthen the company’s resources, to fund future acquisitions and for general corporate purposes. The bottom line however is growth as the company remains “…determined to pursue its strategy of accretive growth.” There is further good news for the purchasers as these shares will be eligible for the dividend expected to be made in early March. Details of the transaction are shown below in the Guts of the Deal.
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