Links
Funding on Call – Navios Acquisition Taps DVB
Earlier this month, Navios struck again. Utilizing its financial prowess, the Navios team again accessed the bank market for the funding of two newbuilding LR1 product tankers, under construction at Sungdong Shipbuilding, with delivery in Q4 2012 and Q1 2013. The new term facility for up to $51 million, to be drawn in two advances, was provided by DVB Bank to Navios Maritime Acquisition Corporation.
The Latest Commodore – Ms. Frangou Breaks Ranks
Ms. Angeliki Frangou, Chairman & CEO of the Navios Group of companies, has been named as the Connecticut Maritime Association (CMA) Commodore for the year 2011. The Award is given each year to a person in the international maritime industry who has contributed to the growth and development of the industry.
Continue Reading
The Rich Get Richer – Liquidity Abounds for Some
The following transactions highlight the oft spoken phrase that the banks have money for their core clients, which tend naturally to be large transparent highly capitalized corporates. While we cannot quibble with the rush to safety in an effort to minimize risk, this trend is transforming the nature of the business, which was built on risk taking entrepreneurs, who not only knew ships, but understood and played the markets. By allocating capital accordingly the banks are changing the fundamental nature of the business from entrepreneurial to corporate. We are not sure if this is good or bad; time will tell.
Navios Acquisition Expands
The focus of Navios’ management attention these days appears to be on newcomer, Navios Maritime Acquisition Corporation. This likely reflects the depressed tanker market and hence the more meaningful opportunity when compared to the dry sector which chugs along profitably. But it is not so easy to find opportunities in the tanker sector as asset values remain high in comparison to earnings. The trick is to find a good asset at a reasonable price and utilize just the right amount of debt to be comfortable while achieving breakeven rates that work at today’s heavily discounted revenue levels. Or, if you are Navios, you might create an even more structured transaction, which actually shifts a portion of the risk to the seller.
For Ms. Frangou and her team this involved a return trip to a South Korea shipyard. There they found and agreed to acquire two 75,000 DWT LR1 product carrier newbuildings scheduled for delivery in Q4 2011. The purchase price of the vessels is $87 million en bloc, which will be financed with the issuance of $5.4 million of mandatorily convertible preferred stock, a new credit facility of $52.2 million (60% LTV) and $29.4 million from cash on hand. The effective acquisition price for the two vessels is $82.8 million or $41.4 million each after giving effect to the preferred stock.
The preferred stock pays a quarterly dividend 0f 2% per annum and will mandatorily convert into shares of common stock as follows: 30% of the outstanding amount will convert on June 30, 2015 and the remaining outstanding amounts will convert on June 30, 2020 at a price per share of common stock of not less than $25.00. The holder of the preferred stock shall have the right to convert the shares into common stock prior to the scheduled maturity dates at a price of $35.00 per share of common stock. The preferred stock does not have any voting rights. In terms of dilutive effect, the number of shares of common stock that may be issued upon conversion ranges from 154,286, if all preferred shares are converted at $35.00 per share of common stock, to 216,000, if all are converted at $25.00. Navios Acquisition’s shares closed yesterday at $5.80 per share.
In addition, the company entered into a loan agreement with EFG Eurobank Ergasias S.A. to borrow up to $52.2 million in two tranches in order to partially finance the acquisition cost of the new vessels. Each tranche of the facility is repayable in 32 equal quarterly installments of $0.35 million each with a final balloon payment of $15.1 million, which equates to an amortization profile of approximately 19 years. The loan bears interest at LIBOR + 2.50% prior to the delivery date, with the spread increasing to 2.75% thereafter. Among the normal and customary financial covenants is the requirement that Navios Maritime Holdings Inc., Angeliki Frangou and their respective affiliates, in the aggregate, control at least 20% of the then outstanding shares of common stock. With that group currently controlling approximately 62.4%, there is sufficient room for the company to sell down its position.
The More the Merrier – Ship Finance Adds Two Supramaxes
Ship Finance International announced this week that it had agreed to acquire two additional 57,000 DWT Supramax vessels, which are sisters to the three purchased in China earlier this year, for an en bloc price of approximately $61 million, which is in line with the earlier purchase. Delivery is expected to occur in the 2nd and 3rd quarters of 2011. The vessels will be time chartered to the same Asian-based logistics company for a term of 10 years at a daily net charter rate of approximately $16,000 per vessel, lower than the $17,000 done in the earlier transaction.
While detail on the financing is scarce, the company says it has received indications from the banks for 80% financing. Based upon the recently concluded financing for two of the earlier vessels, it appears likely that the company will be able to achieve eight year financing with limited recourse to the company.
These appear to be aggressive terms for limited recourse asset-based bilateral loan. The signature matters.
As Predicted, Warrant Program a Success
Today, Navios Maritime Acquisition Corporation announced the successful completion of its warrant program. Of the total public warrants, 76.13% were exercised, exceeding the minimum threshold of 75%, thereby allowing the exercise of the private warrants. The final tally showed 19,262,006 public warrants were exercised of which 19,246,056 were exercised on a cashless basis and 15,950 were exercised by payment of the $5.65 cash exercise price.
As a result of the successful conclusion of the program, Navios Maritime Holdings (“Navios”) and Angeliki Frangou will exercise 13,835,000 of the privately issue warrants for cash. The remaining 90,000 private warrants will also be exercised of which 75,000 will be done on a cashless basis.
Cool Reception – Navios Extends Offer
With only 38% of the outstanding public warrants tendered (2% for cash) as of the close of business Monday, Navios Maritime Acquisition Corporation announced a five day extension of the program and amended its terms to waive the condition that at least 15% of the outstanding warrants be exercised for cash. The requirement that at least 75% of the 25.3 million outstanding public warrants be exercised remains in place.
This threshold is also condition to the exercise of the warrants held by Navios Maritime Holdings (“Navios”) and Ms. Angeliki Frangou, who agreed to exercise on a cash basis a combined 13.84 million warrants with an aggregate cash exercise price of approximately $78.2 million. These proceeds together with those from the exercise of the public warrants on a cash basis were to be used to fund the acquisition of the seven VLCCs. In the event there is a cash shortfall as a result of the waiver of the 15% cash exercise condition, the parent company has agreed to provide additional financing to Navios Acquisition in the form of short-term debt priced at Navios’ average unsecured borrowing rate.
Continue Reading
When a Good Reputation is an Impediment
The SPAC is an ideal tool for an acquisition. Investors express confidence in management granting a “hunting license” for a business within one or more industries in the form of IPO cash proceeds. Once the target is identified, the investors vote on whether to approve the combination, with a majority of shareholders required to approve the transaction and not more than 39% voting to cash out. Until the vote, the proceeds from the IPO are invested in U.S. Treasuries. In return for his money, the investor get a share of common equity and upside in the form of a warrant.
No one understands this structure better than Navios Maritime Holdings, which was acquired in 2005 by Ms. Angeliki Frangou through a SPAC. Navios Maritime Acquisition (“NNA”), a SPAC formed in June 2008, was an encore performance. In this instance, the company had two years to find an acquisition within the marine or marine logistics industries. The company was deliberate in their review of opportunities, given the uncertainty in the market and price discovery that was ongoing Ultimately, the company secured a distressed deal within the tanker sector whereby the Company committed to invest $457.7 million for eleven product tankers and two chemical tankers. The Company and Ms. Frangou evidenced their strong belief in and commitment to the deal by agreeing to buy, respectively, $45 million and $15 million of shares.
Paying the Bill
Ms. Angeliki Frangou and her team will search everywhere for funding, leaving no opportunity unturned. And certainly no one is more creative. To pay for Navios Maritime Acquisition Corporation’s recent purchase of VLCCs, the company announced, last week, that it would give the holders of the 25.3 million outstanding warrants issued in the initial public offering (“Public Warrants”) a limited opportunity to acquire shares at a reduced price. The offer is coupled with a consent solicitation accelerating Navios Maritime Holdings ability to exercise certain warrants on identical terms.
Continue Reading
Navios Navy Adds Battleships
Irrepressible, the navy known as Navios last week acquired through its tanker subsidiary, Navios Maritime Acquisition (“Acquisition”), a fleet of seven VLCCs from Fred Cheng’s Shinyo International Group Limited. The aggregate purchase price was $587 million and the acquisition was done as a securities purchase agreement primarily to allow for the assumption of debt. The transaction will be financed with bank debt of $453 million, representing approximately 78% of the purchase price, with cash of $123 million (21%) and through the issuance of $11 million of Acquisition’s shares to the seller. In effect, third parties are funding approximately 80% of the purchase price, a remarkable achievement these days.
The seven vessels to be acquired include six on the water and one newbuilding to be delivered in a year’s time. The fleet has an average age of 8.6 years and a remaining charter term of 8.8 years with an average charter rate of $40,440 net per day. Most importantly, the newbuilding and the recently delivered vessel, the most expensive, are chartered for 15 years. There is also upside with five of the seven charters including profit sharing.
Continue Reading
Markets In Disarray
The equity markets can best be described as volatile, although that characterization may be kind, as they seem to be heading in one direction only. Two companies, Ridgebury Tankers and Navios Maritime Acquisition have braved the onslaught but we suspect would have preferred a better choice of timing. Unlike the preceding IPO offerings, Crude Carriers and Scorpio Tankers, that took place earlier this year, Ridgebury is not the master of its fate. Specifically, its vessels are on option from a third party seller, Teekay, as opposed to an affiliated party, which implies certain time limitations. Despite the switchover from the Gemini to Heidmar pool, they remain on the road for a second week. As a firm believer in no news is good news, we remain hopeful that Bob Burke and his team along with Jefferies will be successful.
Clearly, Ms. Angeliki Frangou leads a charmed life or is an extraordinary negotiator. Despite the uncertain markets and a preliminary vote that was largely against the acquisition of a tanker fleet of 11 product carriers and 2 chemical tankers, shareholders of Navios Maritime Acquisition approved the transaction on Tuesday thereby avoiding the necessity of Navios Maritime Holdings becoming the owner/operator of the tonnage. According to Chris Wetherbee of FBR Capital Markets, the company was able to secure a 60% plus one majority vote from shareholders, but expects Navios’ ownership stake will likely be higher than its 33% target, as it likely purchased shares from dissidents. With three public companies under her purview, Ms. Frangou is approaching Peter G’s record of four. We are in awe of the capacity of these two industry leaders to manage successfully these distinct companies in different sectors with distinctly different shareholders.
Continue Reading
A Book Review
While it will never be a best seller, Navios Maritime Acquisition Corporation’s (“NMAC”) proxy statement makes a cogent argument for shareholder approval of the pending transaction for the acquisition of 11 newbuilding product tankers (four LR1s and seven MR2s) and two chemical tankers with an option to acquire two further LR1 product tankers. The acquisition cost is $457.7 million of which $334.3 million will be financed with debt. Included in the $344.3 million in debt facilities is a $52 million loan facility, which is in advance stages of negotiation, but, unlike the rest, not yet committed. The balance of the purchase price will be funded from the $250.8 million of proceeds of the initial public offering of 25.3 million units, including 3.3 million units issued upon the exercise of the over-allotment option. Invested in Treasuries, the cash position of the trust account stood at $251.5 as of year-end. The actual cash availability is uncertain however as unit holders can vote against the acquisition and exercise their conversion rights.
Continue Reading
The Official Guide To Marine Finance Providers
Shipping Index
