Links
Meeting an Immediate Need, While Looking to the Future- Scorpio Borrows and Files Shelf
In order to partially finance the recently acquired two LR1 Product tankers of 51,000 DWT built in Korea which deliver this month, Scorpio Tankers Inc. yesterday announced that they had arranged a new credit facility with Nordea Bank, DnB NOR and ABN AMRO to finance 50% of the $70 million purchase price of the vessels. The new facility provides availability of up to $150 million for a year.
Success But at a Price – Box Ships’ IPO
Following quickly on the heels of the Golar LNG Partners LP offering, Box Ships Inc., a wholly owned subsidiary of Paragon Shipping Inc. became the second IPO of the year. Approximately three weeks ago, the company filed a registration statement to sell 10 million shares of the common stock of the company, leaving Paragon with a 22.7% stake. The sale would include a green shoe of a further 1.5 million shares. Pricing was expected to be between $15 and $17 per share and assuming midpoint pricing, gross proceeds would be $160 million. The net proceeds of the offering would be used to partially fund the acquisition of an initial fleet of six containerships, including three being acquired from Paragon, with an aggregate capacity of 28,177 TEU.
Ocean Rig’s Debt Feast – Banks and Bond Market Provide Support
It’s been a very busy and productive month for Ocean Rig UDW Inc. as it has finally fully funded its current capex program. First, the company arranged a new $800 million syndicated secured term loan facility to partially finance the construction costs of the Ocean Rig Corcovado and Ocean Rig Olympia. The facility has a five year term based upon a 12 year amortization and bears interest at LIBOR plus a margin. The facility is led by Nordea and ABN AMRO and includes in the syndicate GIEK, DVB Bank, Deutsche Bank and National Bank of Greece. A portion of the proceeds of the loan will be used to repay the $325 million bridge loan used to partially finance the Corcovado.
In addition, the company restructured its $1.1 billion secured credit facility led by Deutsche Bank which is secured by the Ocean Rig Poseidon and Ocean Rig Mykonos. The parties have agreed to reduce the maximum availability from $562 million to $495 million for each rig. Ocean Rig has also agreed to provide an unlimited recourse guarantee and will be subject to certain financial covenants. This guarantee is in addition to the existing Dryships’ guarantee. With a contract now in place, full drawdowns will be permitted for the Poseidon. For the Mykonos, the company has up to one month prior to delivery to execute an acceptable drilling contract in order to draw down on its facility.
After putting these deals to bed, the company then announced its intention to offer, through a private placement, $500 million of senior unsecured bonds in the Norwegian market. While on the roadshow, the company met some resistance from investors and had to sweeten the terms. The coupon range went from 8.25%-8.75% to 9.00%-9.50% with the call options also increasing. Year 3’s call went from 103.5% to 104.5%, while year 4’s call increased 50 bps to 102.5. The company has also undertaken to have the bonds rated by both Moodys and Standard & Poors and to list the bonds publicly on a reputable exchange.
Yesterday, DryShips announced that it had priced the $500 million of the senior secured bonds due in 2016 at 9.5%, the top end of the adjusted range. The bonds were priced at par with the proceeds to be used to fund the group’s newbuilding program and for general corporate purposes. With substantial bank debt ahead of it, these unsecured bonds had to be priced right as well as carefully structured to protect the bondholders. In addition to tight financial covenants, the company has various undertakings including a negative pledge and covenants that restrict funds flow within the group as well as dividends. More detail is provided in the Guts of the Deal attached.
Ocean Rig is a pure play ultra-deepwater driller, with a superior asset base, including two harsh environment semisubmersible drilling rigs and, by the end of the year, four premium drillships with options for four more.
In its credit analysis of the company, Nordea highlights as credit positives:
- Modern and competitive fleet of ultra-deepwater units
- Experienced deepwater driller and harsh environment operator, which has operated in 12 countries over the past nine years.
- Strong market outlook
- Modest credit profile
Credit challenges include:
- Exposure to a highly cyclical industry
- High newbuilding activity
- Limited cash flow visibility
- Significant committed capital expenditures as well as the possibility of the exercise of the options
- Risk of increased leverage.
On a preliminary basis, the company was given shadow rating of “B+” with the bonds one notch lower at “B.”
The global coordinator and lead manager was Pareto Securities and the joint lead managers were Fearnley Fonds and Nordea Markets .
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.
Continue Reading
MISC secures USD 100 Million For Offshore Project
Following the announcement that it has clinched a contract for the lease of 2 mobile offshore production units, MISC’s subsidiary Malaysian Offshore Mobile Production (Labuan) has completed a USD 110 million seven year project financing with mandated lead arrangers ABN AMRO, ANZ, ING Bank, Mizuho Corporate Bank and Sumitomo Mitsui Banking Corporation. Continue Reading
The Economy and the Markets
STAY HOPEFUL
Investor sentiment is very often unpredictable and moody, especially today when economic data continues to come in mixed and casts doubts on whether the economic stabilization will be able to materialise into a recovery. And against this uncertain backdrop, it was refreshing to listen to an optimistic voice among the crowd on where the global economy is heading. François Trahan, Senior Managing Director and Chief Investment Strategist, ISI Group started off the Wednesday’s session of Marine Money Week on a positive note by reminding the audience that even though consumer deleveraging has already begun and may well continue for the next decade, equities can rally even during such times if the government is able to offset the consumer contraction. He pointed out that the US stimulus package is still very much in its infancy stage considering the fact that the government has only spent 5% or USD 42 billion out of the USD 787 billion.
Off-Market Financing: Finding Hidden Money
By Matt McCleery & Gordon Fuller
Ult r apet r o l Taps into Debt & Equity at IFC…Twice
Proving our theory that shipowners who want to grow must constantly scour the world for new and alternative sources of capital, Ultrapetrol has tapped into International Finance Corporation for debt and equity… and they’ve done in twice in 2003!
We reported a few weeks ago that the Menendez family, which owns and manages high yield issuer Ultrapetrol, has continued to hustle to meet its obligations to bond holders while at the same timing growing their own businesses. To finance this growth, Ultrapetrol has tapped into a rich vein of debt and equity finance from International Finance Corporation (IFC), the private sector financing arm of the World Bank. Several months ago Ultrapetrol affiliate UABL Limited (50/50 joint venture between Ultrapetrol and beleaguered barge company ACBL) had entered into two separate loan agreements with the IFC and Kreditanstalt Fur Wiederaufbau (KFW) for a total of $40 million. The facilities are interest-only until 2005 and mature 2009 and 2011. Proceeds of the deals will be used to finance CapEx for UABL Limited for the next 3 years. Although this “CapEx” could ostensibly refer to the cash needed to develop its terminal operations, we understand that even if ACL decides to sell its stake in ACBL, the cash could not be used to provide dry powder needed for the acquisition.
Just as the ink is drying on the first IFC deal, Marine Money has learned that IFC has committed to lend $70 million to UP Offshore, a start-up shipping group with subsidiaries incorporated in Brazil and Panama that is co-owned by Ultrapetrol and the AIGGE Capital Latin American Infrastructure Fund L.P. The investment will be used by UP Offshore for the acquisition of up to six newly built platform supply vessels in order to provide transportation services to oil and gas companies engaged in exploration and production activities on the Brazilian Atlantic shelf.
ABN AMRO Greece -fighting fit in shipping
By Kevin Oates
The ABN AMRO Group is headquartered in Amsterdam and is one of the world’s largest financial institutions. Though the rankings are continuously changing in this day and age of consolidation, it is probably accurate to say that it is in the top 10 banks in Europe and the top 20 worldwide. Employees number over 100,000 worldwide working from over 3,000 locations in over 60 countries. The bank has
a 175 year history in financing international trade.
It was rather sad then that right at the end of 2001 ABN AMRO were reported in the press as pulling out of shipping. The shipping portfolio was reported to be about $ 4 billion but enthusiasm for shipping finance as a business division of the bank was rather muted. Even Fred Weenig, head of shipping at the time at ABN AMRO, was reported as stating that shipping was “too straightforward” for many financiers. To make it more attractive for banks there has to be a lot of fee based business to reach required returns. He went on to say that ” if you look at the range of products that can be sold to shipowners, it is small,” So the hefty borrowing requirements of shipowners just did not match the returns which the bank could hope to make.
Of course the bank did not just walk from shipping. The shipping portfolio remained intact and the management of it was devolved to the local offices. This included New York, Hong Kong, Singapore and Piraeus.
The Official Guide To Marine Finance Providers
Shipping Index
