JBIC Finances Venezuela

The Japan Bank for International Cooperation (“JBIC”) is certainly not resting on its laurels as it continues to offer foreign shipowners export finance for their ship orders in Japan. It was just two months ago when JBIC provided K-Line Offshore two separate loans worth USD 170 million for the financing of two offshore support vessels, and this time it has concluded a JPY 19.6 billion (USD 238 million) loan agreement with Panavenflot Corp. Panavenflot is the Panamanian subsidiary of PDV Marina S.A., which is owned by Venezuela’s state-run oil corporation Petroleos de Venezuela, SA. JBIC together with Sumitomo Mitsui Banking Corp will jointly provide Panavenflot the export credit facility to finance the construction of four 104,300-dwt Aframax tankers to be built by Japan’s Sumitomo Heavy Industries Marine & Engineering. Trading house Itochu Corp acted as the intermediary between the yard and the Venezuelan owner.

Name Change Needed – DRYS Goes Wet

It should come as no surprise that George Economou’s DryShips was in the news. First, there was the announcement that the private placement of shares in Ocean Rig UDW was successfully closed with total gross proceeds of $500 million raised. Not only was it a success from the perspective of the capital raise, the company achieved a superior market valuation, both in terms of the rigs themselves as well as in relation to its peers, according to Scott Burk of Oppenheimer.  But perhaps more importantly, the company now has a balance sheet which is self-sustaining.

This news was immediately followed by the company’s announcement that the Board of Directors had approved a share purchase program for up to $25 million of common stock of Ocean Rig for the first quarter of 2011. The maximum share purchase price is capped at $17.50, the offering price of the shares.

But why stop there? In furtherance of its diversification strategy, the company announced that it had entered into agreements with Samsung to purchase twelve high specification newbuilding tankers at a cost of $770 million. The order consists of six Aframax tankers, of which four will deliver in 2011 and two in 2012, and six Suezmax tankers, of which one will deliver in 2011, two in 2012 and three in 2013. Given the delivery dates involved, the majority of these were clearly re-sales, which is further affirmed by the favorable payment terms of approximately 70% of the contract price per vessel due at delivery. On the other hand, as Erik Nikolai Stavseth of Arctic Securities points out Samsung is involved in the construction of its drillships and the tanker order must be viewed in the context of the total relationship with the shipyard.  The company has paid in $120 million from its cash as the down payment on the tankers and intends to finance the balance from cash on hand and bank debt. Ultimately, the intention is to position the company for a spin-off or IPO.

The deal has engendered much discussion among the analysts, particularly with respect to the price paid and the original contracting party. DryShips tried to head off discussion of the former by describing the vessels as having high specification and over $3 million in extras per vessel. Nevertheless, Pareto, Oppenheimer and Morgan Stanley suggest that the company paid a premium of $11 million, $38 million and $50 million respectively for the entire package based upon their analyses. The bigger question arose when the observant analysts noted that Mr. Economou’s private company, Cardiff Marine, had a similar order in place, raising the question as to whether the vessels were in fact purchased from Cardiff or were purchased directly from Samsung. Management made it clear that the transaction was done directly with the shipyard.

While speculation on such a move initially centered on containers, DryShips’ need to resolve Ocean Rig’s financing and the speedy recovery in the container space foreclosed that opportunity. While near-term prospects for tankers do not look bright, most analysts believe, as does Mr. Economou, in an improving medium and long-term outlook. In the interim, DryShips is a diversified holding company with interests in dry bulk, crude oil tankers and offshore drilling.

Pareto Places $60 Million of Fresh Equity for B+H

Pareto Places $60 Million of Fresh Equity for B+HUsing the issuer-friendly Form Reg F, which allows a foreign issuer to sell securities to foreign investors through a very simple process, Pareto Securities raised $60 million of cash for tanker company B+H this week. As we understand it, the deal was scaled back from an initial size of about $120 million and pricing was $18.50, about 5% below the trading price at the time. Although we have not done the math, the valuation is somewhere in the vicinity of net asset value. As we understand it, the newly issued shares will trade over the counter in Norway (until BHO lists there officially), and the U.S. lock-up period is only 40 days for investors. As you can see from the accompanying stock price graph, the shares have experienced notable selling pressure since the deal was announced.
Despite the reduced size and valuation that resulted from recent weakness in both the equity and shipping markets, this is an important deal for B+H for a few reasons. First off, the company now has a meaningful amount of buying power and we would be very surprised if they don’t have some specific ideas about how to use it. We would speculate that if B+H has, or will identify, a deal with some charter coverage (as they recently did with the OBO on charter to Sempra), bank financing could add another $200 million in dry powder. B+H management has proven themselves to be very experienced dealmakers with the patience required to do sensible deals in today’s market. Moreover, the new issue will reduce Michael Hudner’s stake to about 50% of the outstanding shares and thereby increase the free float by about five times.

KDB Let’s Together Fund Finds Interest

Bank of Nova Scotia Asia and its syndicate of lenders have recently participated in Korea Development Bank’s shipping program. This is the first transaction effected under KDB Let’s Get Together Program, designed to enhance the liquidity of Korean shipping companies. Continue Reading

test

test

Teekay TOO

On Wednesday after the market closed, Teekay Offshore Partners (“TOO”) announced plans to offer 6,500,000 common units, representing limited partnership interests in another follow-on offering. The agreement with the underwriters also includes a green shoe of 975,000 shares.

Today, the units were priced at $14.32, a discount of 6.77% to yesterday’s closing price of $15.36.

The net proceeds of the offering, approximately $100 million, will be used to repay amounts outstanding under one of their credit facilities, which bears interest at LIBOR plus 0.625% and matures in October 2014. Currently, TOO has in total 7 revolvers which provide borrowings of up to $1.45 billion of which $147.7 million is undrawn. With the availability reducing by a further $122.4 million over the reminder of 2009, this repayment will allow the partnership to be able to redraw on this credit facility in the future to fund acquisitions and for general partnership purposes.
Continue Reading

Gray skies are gonna clear up…

Gray skies are gonna clear up,
Put on a happy face;
Brush off the clouds and cheer up,
Put on a happy face.
Take off the gloomy mask of tragedy,
It’s not your style;
– Put On a Happy Face, Lyrics by Lee Adams and Music by Charles Strouse from Bye Bye Birdie.

Despite continued market weakness and volatility, Pareto held a highly successful Shipping Conference last Friday in New York and they may have partially succeeded in putting a happy face on the industry. But then again, only one dry bulk company spoke. In fairness, however, Erik Helberg of Pareto did correctly note that the presenters represented some of the top public shipping companies.  Given the multitude of excellent presentations and the need to avoid favoritism, we have below incorporated Pareto’s initial key global takeaways supplemented by some of our favorites.

Continue Reading

Change – Faster Than a Speeding Bullet, But For the Better?

The concept of change continues to gain currency in both politics and financial markets. In times of crisis, surely speed is of the essence. Crisis management by definition precludes well thought out solutions. For example, this was evident when the government changed its position about buying only mortgages and decided instead to cover the full gamut of toxic financial products or restricting short selling on a wholesale basis rather than focusing on what many perceive as the real issue, naked short selling. It becomes more of showing that something is being done, than finding the real long-term solution-like putting band-aids on a million cuts.
Continue Reading

December 2, 1999

LAZARD SHUFFLE

Veteran shipping investment banker Hamish Norton left Lazard Freres, and indeed the shipping industry, yesterday to join the technology group at investment bank Bear Sterns. Lawyer and presidential confidante Vernon Jorden joined Lazards this week, though it is unclear whether even Mr. Jorden is diplomatic enough to work with shipping investors. Mr. Norton told us that the technology group at Bear Stearns has particular expertise in the areas of software and aerospace. While there is very little capital markets deal flow for shipping at the moment, in our view the field of maritime investment banking will be a bit less crowded when shipping deals start getting done again.

HIGH YIELD

HVIDE

After successfully rebutting a few criticisms of its plan of reorganization, Hvide Marine now has just one more date with the bankruptcy judge, on December 9th, and looks set to emerge from bankruptcy just in time for Y2K to erase all reams of documentation. We understand that Deutsche Bank is arranging the exit financing. The structure of the reorganization has been well covered in Freshly Minted, so search the FM Archive for details.

Those with sharp pencils and a penchant for penny stocks might want to take a look at Hvide common stock. The shares presently trade on the OTC Bulletin Board at around $0.13. Under the plan of reorganization, holders of common shares will receive a warrant for 1 new share of Hvide for every 124 old shares of Hvide held (about 8:1000). Old shares will be cancelled and warrants will have a strike price of $38 and expiration date 4 years from date of issue. Give us a call if you would like to take a look at Hvide’s pro forma 12.3 1.99 balance sheet which uses “Fresh Start Accounting” (i.e vessels have been written down from book to current market value). Continue Reading