CSI Vancouver – Dissecting the Seaspan and MSC Bareboat Charter

We do not believe that the recently announced five year bareboat charter by Seaspan Corporation of two of the former Maersk 4,800 TEU vessels to MSC Mediterranean Shipping Company (“MSC”) received the attention it warrants for the lessons it offers. On the surface, this financial transaction solves a number of key concerns associated with these non-core vessels by effectively removing them from Seaspan’s fleet by transferring both operating and residual risk to MSC. There was a price, as a loss was incurred ($8.9 million on the first two vessels), and to understand what went wrong and if this latest transaction salvages the overall experience, we will attempt a difficult post-mortem.

But in all things context is important. Bear in mind that this analysis focuses on four out of 69 on the water vessels or $160 million out of total assets of $63 billion. In short, this transaction must be considered in the context of Seaspan’s entire “investment” portfolio which requires careful management and a focus on overall results rather than piecemeal transactions.

Written by: marinemoney | Categories: Freshly Minted, The Week in Review | November 10th, 2011 | Add a Comment

Even Big Boys Get the Blues – A.P Moller-Maersk Bides Time

Market reports suggest that A.P Moller Maersk has postponed a planned EUR 1 billion bond issue due to poor market conditions. Led by Barclays, ING, J.P. Morgan, Mitsubishi and Nordea, the roadshow for the 10-year bond was to have begun on May 31 but never transpired. Analysts attribute the delay to a poor corporate bond market which is struggling with the Greek debt crisis among other issues. Following its desire to diversify its funding sources, Maersk has been a recent and regular visitor to the bond market beginning with its debut in 2009, a 750 million Euro issue. This was quickly followed by a NOK 4 billion issue and last November by a 500 million Euro 7-year issue. No worries here as the markets will certainly right themselves and in the meanwhile we are certain Maersk has sufficient liquidity to meet its needs.

Written by: marinemoney | Categories: Freshly Minted, The Week in Review | June 23rd, 2011 | Add a Comment

APM Goes Back to the Bond Market

Having had its first taste last year, A.P. Moller-Maersk (“APM”) returned to the public bond market a couple of weeks ago, issuing EUR 500 million of 7-year bonds with a coupon of 4.375%. The net proceeds will be used for general corporate purposes. Unsurprisingly, investor interest was strong with the bonds being more than three times oversubscribed. As a point of comparison, last year’s issue of EUR 750 million 5-year bonds carried a coupon of 4.875%. Placed by Barclays Capital, BNP Paribas, Danske Bank, HSBC and RBS, the bonds will be listed on the Luxembourg Stock Exchange.

Written by: marinemoney | Categories: Freshly Minted, The Week in Review | December 2nd, 2010 | Add a Comment

Who Wants to Call the Turn?

We might. While the data may be considered slim and possibly distorted by the $6.75 billion A.P Moller-Maersk transaction, the nine-month 2010 Dealogic shipping data intimates a reversal in the downward trend in syndicated lending which began in 2007. Not only were the number of syndicated deals, volume and new money higher, club deal volume and numbers were down. The latter of course might just reflect deal size, where five of the top fifteen deals were in excess of $1 billion, but we will give the data the benefit of the doubt. In terms of specifics, the number and volume of deals for the 9-months of 2010 was 110 deals totaling $28.4 billion versus the one year earlier total of 90 deals totaling $25.9 billion. The best way to see the trend over time is to look at the data, which we show pictorially below. And, yes, you needn’t remind us that one point does not make a trend.

Written by: marinemoney | Categories: Freshly Minted, Market Commentary | October 7th, 2010 | Add a Comment

In Some Respects, a Return to Normalcy

This week Dealogic published its first half 2010 Bookrunner and MLA Tables for Syndicated Shipping Loans and the news was still dismal but in some respects hopeful. In terms of the big picture, while dollar volumes continued their downward trend, the number of deals in the first half actually increased slightly indicative of, perhaps, less capacity or more focused lending. While the number of club deals increased slightly, from 19 to 23, the deal value declined in proportion to total volume intimating at the revival of the larger syndications. And finally, approximately 90% of the dollar volume was new business rather than refinancings, which is indicative of an improving credit market. Illustrative data are shown graphically herein.

But, for our readers, it is truly the standings that matter as they represent a scorecard of their performance for the first half of the year. While there was shifting in the standings compared to a year ago, the bookrunner table remained relatively stable. Mitsubishi UFJ displaced its fellow Japanese bank, SMBC for the pole position, while DnB NOR moved into second pushing Nordea into the 4th spot. Outsiders from a year ago, Credit Agricole CIB and ABN AMRO found spots in the top ten this time around. In terms of number of deals, DnB and Mizuho had a substantial lead recording 9 and 8 deals respectively far outpacing the remaining bookrunners. Finally, market share is clearly more concentrated at the top compared to the comparable period last year.
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Written by: marinemoney | Categories: Freshly Minted, The Week in Review | July 8th, 2010 | Add a Comment

The Importance of Self Preservation

In 2009, the equity markets had a roller coaster run, but some shipping companies found windows of opportunity for share placements, often tied to debt reduction. Self help through raising equity capital for balance sheet recapitalization is one way to ride through the difficult times. There had been varying degrees of success and among the most notable would be Neptune Oriental Lines’ (“NOL”) USD 972 million rights issue in June and NYK’s recently concluded JPY 116.4 billion (USD 1.3 billion) global equity offering. Continue Reading

Written by: carisk | Categories: Asia, Equity | December 31st, 2009 | Add a Comment

Pipavav Shipyard

This week, we are impressed to see another shipyard finding success in the IPO market. This makes India’s Pipavav Shipyard the third successful shipbuilder to raise equity following Taiwan’s China Shipbuilding Corporation and Malaysia’s TAS Offshore since the beginning of this year.

Pipavav Shipyard will soon be listed on the Bombay Stock Exchange and National Stock Exchange upon the completion of its book building. The private shipyard has offered its shares at a price band of Rs 55 – 60 a piece and plans to raise between Rs 4.7 billion (USD 98 million) and Rs 510 billion (USD 106 million). This amount is significantly lesser than the USD 200 million it had previously planned when the shipyard registered its IPO during the first quarter of 2008. Out of the 85.45 million shares on offer, 2.6 million shares have been set aside for the employees. We have provided a summary of the transaction in the Guts of the Deal table that follows. JM Financial Consultants, Citigroup Global Markets India, Enam Securities and SBI Capital Markets are the appointed bookrunners for this IPO. Continue Reading

Written by: carisk | Categories: Asia, Equity | September 24th, 2009 | Add a Comment

Deal or No Deal?

Rumors in the market are rife about a new massive financing arranged for A.P. Moller Maersk (“APM”). According to Dealogic, the banks involved, as is customary, have reported to them that APM has entered into a $6.5 billion 7 year credit facility. In fact, as an industry source suggests, and Dealogic confirms, this is an old deal in the same amount that has been amended. And, as such, there is no new money involved.

In a precautionary move, given the uncertain credit markets, the amended transaction has been structured as a forward start facility. Upon expiry of the existing facility, the new one commences. In this instance, the start date is in 2012. The mandated lead arrangers on both include Citi, Danske Bank, HSBC, JPMorgan, Mitsubishi UFJ and Nordea.

Written by: carisk | Categories: Freshly Minted, The Week in Review | June 18th, 2009 | Add a Comment

A.P. Moller-Maersk Gets Discount on 25% Stake in PONL

A.P. Moller-Maersk received the first definitive word on its offer to purchase Royal P&O Nedlloyd this week with P&O’s early sale of its 25% stake in the company at Euro 56.25 per share – a Euro 0.75 discount to the offer price – through Nordea and Danske banks. This brings A.P. Moller’s stake in the conglomerate up to 45%.

Written by: carisk | Categories: Freshly Minted, The Week in Review | June 30th, 2005 | Add a Comment

A.P. Moller Bids for P&O Nedlloyd

In early 2004, it became clear to us that 2005 would be the most active year of consolidation among shipping companies in history. Our belief was underpinned by the fact that shipping companies were generating loads of cash from both operations and the capital markets, the fundamentals for the shipping industry looked set to remain strong and shipyards were operating at or near full capacity. So, armed with loads of cash and good prospects, it is natural to expect that companies would look to reap operational and financial synergies and leverage through growth, and that that growth would come in the form of corporate deals rather than single vessel purchases. And that is exactly what has happened in virtually every sector of the international shipping industry.

The Biggest Gets Bigger

In the latest and most dramatic example of this phenomenon, A.P. Moller-Maersk launched a takeover bid this week for 100% of the shares in Royal P&O Nedlloyd in the largest container shipping M&A deal ever. The takeover bid values P&O at Euro 57 per share, which represents a 41% premium to the then-current price and a 45% premium to the price over the last six months. The bid is also a whopping 130% over the rights issue price on the deal that received Marine Money’s Deal of the Year Award this year and values the company at 1.6x FY05E. Although we expect Royal P&O Nedlloyd shareholders and P&O shareholders, who own 25% of Royal P&O Nedlloyd, to vote in favor the deal, the European Commission may require Maersk to sell off certain routes in order to consummate the deal legally, which could in turn spark a series of smaller M&A deals.

Randy Sesson at Goldman Sachs is representing A.P. Moller on the transaction, JP Morgan is representing Royal P&O Nedlloyd and Citigroup is representing P&O.

Valuation Metrics – AP Moller Set to Get P&O for Free

The transaction is an important one for both AP Moller and the container market in general. As you can see from the graph on the first page, the deal solidifies AP Moller’s position as the world’s largest carrier by taking out the number 3 player and propelling itself to a size that is set to be more than double that of its next largest competitor. On the industry level, the good news is that it shows APM’s bullishness about the outlook for the market, even despite the enormous post-panamax containership order book and some gloomy forecasts by analysts. The loss of P&O from the Grand Alliance will have a negative impact on fellow members NYK, OOCL and Hapag-Lloyd, as Grand Alliance has historically been an effective competitor to Maersk although we can hope that the rationalization of tonnage might ultimately help lessen the blows of looming overcapacity. In a research note, Citigroup container shipping analyst Charles de Trenck said he thinks the deal might raise the ante for other container lines, perhaps suprring NOL to acquire Wan Hai Lines, which has loads of ships on order. De Trenck also surmises that Evergreen could potentially be hurt, so we would expect this transaction to cause a spate of mergers and acquisitions.

Like any truly good M&A deal, this one is beneficial to everyone involved. Shareholders in Royal P&O Nedlloyd get a great valuation for their shares at a time when many think the market might start to weaken. If they want to remain exposed to the industry, they can use their tender proceeds to buy shares in AP Moller. And for AP Moller, the deal is fantastic. With synergies of around $350 million and AP Moller’s P/E valuation of 10x, the company’s share price should increase by the entire purchase price of the new company. Adding in the $400 million of earnings that Royal P&O Nedlloyd is expected to generate in 2005 will bring the number to $4 billion. Put another way, one could make the argument that AP Moller is getting Royal P&O Nedlloyd company for free!