Serial Convertible Issuer – Seadrill Again

When it comes to financing his offshore drilling company, Mr. Fredriksen likes convertible bonds. With two issues already in place, $1 billion due in 2012 and $500 million in 2014, Seadrill Limited last week sold $650 million of senior unsecured convertible bonds. The original offering size was $550 million with an increase option of $100 million, which was exercised. As a large and regular seller of this financial instrument, which is particularly attractive to hedge funds, the company’s offer attracted strong demand and was oversubscribed within hours. Market talk indicates that there was sufficient interest at the $950 million level. Buyers included the usual investors interested in the offshore industry as well as a number of large buyers not typically found in the sector.

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“Gone in 60 Seconds”

Like the movie highlighted in the title, it comes as no surprise that people work better under pressure. Last week’s $225 million convertible bond offering by Frontline Ltd. evidences that fact. In a matter of two days, Frontline’s bankers, led by joint book-runners ABG Sundal Collier and Deutsche Bank, successfully structured and executed the company’s debut convertible bond issue. And when it came to market, the transaction was fully covered within 1.5 hours and priced within 3 hours of launch. With strong demand across a broad spectrum of investors and geographies, the deal was upsized from the originals $200 million to $225 million.
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Game Changers?

In their 4th quarter earnings release, Golden Ocean Group Limited announced that its application for a secondary listing in Singapore had been approved by the Singapore Exchange (“SGX”). The company already has an operational presence in Asia and saw the opportunity offered by the July 2009 Memorandum of Understanding between SGX and the Oslo Bors (“OSE”), which facilitated a simplified and accelerated dual listing process between the exchanges. This will be the first secondary listing by a Norwegian firm under the new accords.

From our perspective, this is an interesting transaction. Not only is this an example of a western company seeking equity capital in the East, it also raises the question of whether the market would follow the trendsetter, John Fredriksen, who was the first to bring his company to the U.S markets. The successful listing of Golden Ocean will blaze the trail for more to follow and strengthen Singapore’s position as a maritime and financial hub. Continue Reading

Seadrill Taps Bond Market

Last week, Seadrill successfully completed the offering for a five year $500 million senior unsecured convertible bond. Although the books were oversubscribed beyond the original $600 million offering, Seadrill opted to cap the sale at $500 million.

The bond was priced at par to yield 4.875% and will mature in September 2014. The conversion price is $25.18, a 35% premium to the VWAP of the shares on the date of pricing. Given the run-up of the share price (94% YTD), the bankers balanced the two by pricing the offering at the high end of the yield while providing a lower conversion premium.
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Norwegian Bonds Come & Go

Songa Offshore, Wilh. Wilhelmsen and Aker Solutions were a few of the companies, involved in the Norwegian bond market this week. Aker Solution’s NOK 2.1 billion 5 year FRN priced at NIBOR + 4.75% was the largest offering in the domestic market this year, although its parent, Aker ASA, has subscribed to NOK 1 billion of the total issuance. Pricing was highly favorable as the new issue is trading at a spread to swaps 100 bps below the existing 2013 maturity. The company maintained its BBB- rating from Fitch but the outlook was changed to negative.

Wilh. Wilhelmsen ASA successfully pushed out its redemption profile by completing a placement of its own bonds in WWI13 and by “tapping” the same loan, in aggregate, placed a total amount of NOK 560.5 million. The amount issued increased from NOK 800 million to NOK 1 billion and WW’s holdings decreased from NOK 489 million to NOK 129 million. This issue matures in November 2012. With the proceeds, Wilhelmsen bought back bonds amounting to NOK 65 million in WWI11 (July 2010), NOK 75 million in WWI16 (March 2011) and NOK 80 million in WWI06 (May 2011). Pareto Securities managed the transaction.
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Learning From the Master – Part II

On the other hand, Mr. Fredriksen’s investment in Golden Ocean Group (“GOGL”) is not faring as well, but is well on its way to a cure as Messrs Fredriksen and Troim continue to work their magic. It appears that they have restructured the company’s obligations while restoring the balance sheet back to health. And there was nothing mystical about it as all the players contributed by enduring pain in the short-term, hopeful of a recovery in the long-term.

With the assistance of Fearnley Fonds, DnB Nor Markets, Nordea Markets, First Securities, Platou Securities, Arctic Securities, and ABG Sundal Collier, the company issued 180 million (upsized from 165 million due to demand) new shares at a subscription price of NOK 4.10 per share resulting in gross proceeds of approximately $110 million of new equity. The offering was underwritten by Mr. Fredriksen’s Hemen Holdings, which was allocated 72 million shares. Post-offering, Hemen’s interest will remain basically unchanged at 40%.

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Flavor of the Week

Based upon recent S&P reports, Norwegians are finding the LPG segment an attractive investment. DnB NOR is reported to have entered into a sale-leaseback transaction with Stargas. DnB has agreed to purchase the following vessels for $70 million en bloc and lease them back to Stargas under a 7-year bareboat charter.

Exmar also announced that it sold the Carli Bay, a 25,000 cbm LPG built in 1998, to ABG Sundal Collier. The sales price was $49.5 million resulting in a capital gain of approximately $20 million.

We assume all are destined for K/Ss.

Deep Sea Supply Signs Letter of Intent to Buy 6 AHTS from Tidewater