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Jim be Nimble: Citibank, Fortis, Bank of Scotland To Sea Containers Rescue
By Matt McCleery
Jim Sherwood, president of marine container lessor, passenger and freight transport operator, and leisure industry investor Sea Containers (NYSE: SCRA), and his finance team headed up by Danny O’Sullivan have once again proven themselves to be nimble. SCRA signed a $160 million bridge loan from Citigroup just two weeks before the July 1, 2003 maturity of nearly $150 million in high yield bonds, and did it subject to selling Isle of Man Steam Packet, which closed July 15, 2003.
Although the company has a mountain of maturities coming in the next few years, SCRA has continued to meet obligations to lenders, lessors and bond holders even after a disastrous 2001 left the company’s balance sheet in a precarious position. There are loads of lessons to be learned here and we’ll go through them in this article.
One lesson is that when a company is as diversified as SCRA is, some area of the business is bound be going right (or wrong) at any given time and that area of the business can be used to raise cash when the need arises.
N O L FINALLY SELLS AET
By Urs M Dür
[The following is an updated version of what appeared in Freshly Minted May 1st 2003. The conclusions are similar, but new numbers were provided and added to shed even more light on this substantial deal. – ED]
Singapore listed Neptune Orient Lines (NOL) finally, after years of trying to divest itself of its profitable Atlantic basin tanker arm, sold American Eagle Tankers (AET) to Malaysia International Shipping Corp. (MISC) for a total of $1 ,02 billion in equity ($445m), dividend funding $75m) and assumption of debt ($500m according to sources at NOL). NOL, losing over $220m last year and levered 84% debt to book at the end of ’02 (far worse, needless to say, debt/NAV), needed to do something and by our estimation got a big premium for the AET assets even if one includes the goodwill and franchise value associated with AET, about 202% of NAV. We go over our estimates below.
JPMorgan, specifically Michael Borch, was financial advisor to NOL and Citibank to MISC. Both banks, while it appears at this stage that NOL got the better of the deal just as the Aframax market is going to get blasted with a 9% supply increase in a falling market, deserve a huge amount of credit for getting a deal, which many said was politically unfeasible especially as the Malaysian government, via Petronas, and the Singaporean authorities, Temasec, respectively controlling owners of MISC and NOL, are known political rivals not usually willing to cut each other some slack. Really, bravo to both banks.
NYSE Tankers Raise $1.64b 60 Days! (AET to come?)
By Urs Dür
The title depicts what was announced between mid-December 2002 and mid February 2003. It is a deceiving title but we had to catch your eye. Firstly it’s deceiving since much of what was announced has been long in development and/or is yet to be finalized. Secondly, and probably most importantly, it’s deceptive because the fundraising and acquisitions are not done yet, nor in our humble estimation, likely by a long shot.
Of course what we are referring to is Teekay’s (NYSE: TK) $800m acquisition of Navion in December and their $1 44m sub-debt convertible equity (PEP) announced and priced on Febrauay11th. We are also referring to General Maritime’s (NYSE: GMR) $525m acquisition of Metrostar’s existing assets at the end of January and Stelmar’s (NYSE: SJH) $177m purchase of Comninos’ controlled Target Marine’s 6 MR new- buildings on 10th February. The amount raised by these transactions in this period is approximately $1 .64billion, give or take a few million on the variables. The combined tonnage of the tanker deals – which have attributes that effect four different sectors of the tanker market including shuttle tankers, suezmax, aframax and product tankers – is about 4.05 million tonnes not including the chartered-in tonnage of Navion and its associated franchise value for TK. But these are anecdotal figures for the sake of measurement of scope, lets have some fun people!
Equally interesting is what has yet to happen. Most notably the quest to sell, on the part of Singapore listed Neptune Orient Lines (NOL), American Eagle Tankers (AET) is ongoing amidst what has become the soap opera backdrop of NOL’s trials and tribulations of massive losses in the non tanker sectors and the upheaval in its management. No less than five companies; Teekay, General Maritime, Overseas Shipholding Group (NYSE: OSG), Tsakos Energy Navigation (NYSE: TNP), Stena and Malaysian national carrier MISC are in the running for this $750m, 3m ton (or, as we say with a smile, $250/ton purchase). Most readers know that the potential sale of AET has been going on for years like a bad serial soap opera, but with the recent regime change within NOL combined with its massive losses and a good tanker market, we think that AET can be done this year and is likely done sooner rather than later.
WHY MICHAEL PARKER DOESN’T SLEEP
By Matt McCleery
The Citi never sleeps, and apparently neither does Michael Parker. In 2001, Mr. Parker directed Citigroup’s Global Shipping & Logistics division like an orchestra conductor – drawing out the diverse talents of far flung soloists by stitching together client needs, industry expertise, diverse financial products, and sometimes, we repeat sometimes, even providing capital!
The table that accompanies this article speaks volumes about what Citibank is, and isn’t, these days. Here are some of the highlights from where we sit. Citibank doesn’t like to deals that involve less than nine numbers – that’s right – hundreds of millions. There are a few eight-digit deals, like the ones for TMM and V Ships, but those are undoubtedly a cross sell to clients with whom they enjoy lucrative relationships. In the case of TMM’s baby securitization, Citibank also handles their larger banking and capital markets needs, which are massive. In the case of V Ships, we imagine Citibank has been given “value added” services such as cash management and FX, for the ship managers whopping 600 vessel fleet. Providing the dry powder for V Ships acquisition of Acomarit, which was subsequently sold to and bought back from ING, likely fell into the category of being courteous to a good client. As for the $20 million bond deal Citibank arranged for Great Eastern, you can rest assured that the offering proceeds took out Citibank bank debt, or served some other purpose.
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