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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
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.
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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.
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.
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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
Guide To Tax-driven Finance Schemes
By Christoph Toepfer of Toepfer Transport
T he shipping industry is a highly capital intensive business. This is one of the reasons why, over the last 10-15 years, more sophisticated structures have been developed for the financing of ships, including off-balance sheet and leasing structures. Through these financial structures, the primary users of the vessels (e.g. container lines, oil majors etc) have increasingly become disconnected from their ownership.
In the case of container lines, they have operated in highly competitive markets with very small profit margins, often incurring losses. Capital requirements grew and to achieve economies of scale many lines have had to undertake such expansion with their own capital resources. Technical innovation and economies of scale have resulted in ever larger vessels being required; vessels which previously had not existed and therefore had to be built new. Hence, container lines have either been obliged build and finance these new types of vessel themselves or provide employment guarantees to third party investors in the form of long term time charters. In order to maintain the greatest operational flexibility and leave long term asset ownership and residual value risk to others, the lines have also used these financing schemes for smaller vessels.
The low return on capital from ship owning activities has increasingly led the oil majors to leave vessel ownership to others with the additional benefit of distancing themselves from the liability for pollution. As a result, oil majors have substantially reduced their owned fleets in favour of chartered tonnage in recent years.
Forget OPA, Meet Sarbox
By Gary J. Wolfe of Seward & Kissel LLP
he Sarbanes-Oxley Act of 2002 (“Sarbanes- Oxley”), adopted over a weekend at the end of July, 2002, hit the capital markets world the way the Oil Pollution Act of 1990 hit the shipping world 12 years ago. Everyone knew it was coming. Everyone pretended that it wasn’t. Therefore, it came “without warning”. Everyone then fell into a state of shock and wished it away. When it would not disappear, everyone learned to live with it. With Sarbanes-Oxley, the capital markets world is still in the wishing away stage. Public companies, whether U.S. or foreign, no matter what their industries, will have to learn to live with it.
What does Sarbanes-Oxley Do?
For those who do not have time to read a 200-page statute, the best way to understand Sarbanes-Oxley is to look at the Enron/Worldcom/Adelphi a/Global Crossing situations, and turn them upside down. The simple rule is: If something scandalous happened at Enron, Worldcom, Adelphia or Global Crossing that angered the investing public, then Sarbanes-Oxley forbids it or tries to make it much more difficult. We can examine the companies in order and see how Sarbanes-Oxley addresses their situations. We can then see how the Sarbanes- Oxley provisions may apply to public shipping companies, especially those that are not U.S. incorporated or headquartered.
The Official Guide To Marine Finance Providers
Shipping Index
