Links
Resurrected – TBS Deleverages
On Wednesday, TBS International plc announced agreements with its bank lenders on terms to reduce its leverage. TBS and its main bank syndicates led by Bank of America and DVB Group Merchant Bank have agreed to exchange the current outstanding senior debt for new senior debt and equity. The terms provide for the full repayment of the amounts owed to the syndicates over a significantly extended maturity period, while keeping current management in place. TBS’ other lenders Credit Suisse and AIG have agreed on similar terms. The transaction led by The Royal Bank of Scotland was concluded with the bank agreeing to accept redelivery of the six collateral vessels in exchange for a full release of all amounts owed to that syndicate. Unfortunately, the terms of these agreements do not provide for any residual value in the common and preferred equity. We suppose you can call this a negotiated pre-packaged bankruptcy without the courts and the expense.
Transocean goes All-In Raising $1.08 billion in Equity and $2.5 billion in Debt
During the last days of November, Transocean Ltd re-jiggered its balance sheet through an equity follow-on offering and the issuance of serial bonds. First up was the follow-on offering for 26 million shares with a green shoe of a further 3.9 million shares. The offering was priced, through an accelerated bookbuilding process, at $40.50/share (based upon an exchange rate of CHF 0.9215/USD), a discount of 11.8% from the prior day’s closing price when the offering was announced. Proceeds of the share offering will be used to partially re-finance the company’s acquisition of Aker Drilling ASA, which was originally financed from cash and assumption of Aker’s outstanding debt. The replenished cash will be applied to the expected repurchase of approximately $1.7 billion of its 1.5% Series B Convertible Senior Notes due 2037 that holders may require it to re-purchase in December 2011. Barclays Capital and Credit Suisse acted as joint book-running managers of the offering.
Why Do One Deal When You Can Do Two – Teekay Teams with Marubeni to Purchase Maersk LNG
Following closely on the heels of last week’s announced transaction with Sevan, a joint venture of Teekay LNG Partners LP and Marubeni Corporation, announced the acquisition of Maersk LNG Carriers. Also thin on detail, the parties disclosed that the joint venture would acquire the ownership interests in eight LNG carriers from A.P. Moller-Maersk A/S for an aggregate purchase price of approximately $1.402 billion, which will be paid in cash with no assumption of debt. The average age of the fleet is 3.25 years making it the second youngest in the industry and the youngest among all independent owners. As far as responsibilities, Teekay LNG will provide the technical management upon turnover.
Of the eight vessels acquired, the joint venture will acquire 100% interests in six vessels and 26% interests in the remaining two (Maersk Qatar and the Maersk Ras Laffan), which are owned by limited partnerships. The limited partners will have the right to put their interests to the buyer. Of the eight vessels, five are currently operating under long-term fixed rate time charters with an average remaining term of 17 years, exclusive of extension options. The remaining three vessels are employed under short-term fixed rate time charters, however one of these includes an option which if exercised would put it in the long-term category. Based upon the current employment, the transaction will be accretive to Teekay LNG’s distributable cash flow. Although dated, the below chart describes the vessels and identifies those likely to be on long-term charter. Although not identified on the chart, known customers include Total, Yemen LNG, Woodside Petroleum, RasGas, Qatar Gas Transportation Company, Repsol YPF and the BG Group.
Separating the Wheat from the Chaff
Having worked in the sector, we are clearly prejudiced. However, it is obvious to us that investor interest in the container leasing sector has grown. Within the last year (i) one company has gone public (SeaCube); (ii) two companies have been sold to private equity funds (Cronos, Triton); and (iii) the stock prices of the two established public companies (TAL, Textainer) rose almost 50% before retreating in the recent market downturn. The interest of the private equity funds is not surprising. Unlike strategic buyers whose sole interest is in the assets, private equity offers going concern valuations taking into account the essential infrastructure which forms the backbone of the business, but which is extraneous to the strategic buyer. Adding further credence to the sector is the fact that two shipping analysts, Greg Lewis of Credit Suisse and Justin Yagerman of Deutsche Bank, follow the public companies engaged in the sector.
SapuraCrest and Kencana in RM 12 billion Merger
Two Bursa Malaysia listed oil and gas firms, SapuraCrest Petroleum and Kencana Petroleum, are in talks over a potential RM 12 billion (USD 3.95 billion) merger that will create one of the largest integrated oil services companies in the country. The structure of the merger will be carried out in the form of a sale to a SPV, in which a shell company Integral named Integral Key Sdn Bhd (“IKSB”) will acquire the assets and liabilities of both SapuraCrest and Kencana.
Under the buy-out offer, IKSB has offered SapuraCrest’s shareholders RM 5.87 billion (USD 1.95 billion) that will be satisfied by the issuance of 2.5 billion new ordinary shares in IKSB at an issue price of RM 2.00 per new IKSB share and a cash payment of RM 875 million (USD 291 million). IKSB has simultaneously submitted a RM 5.97 billion (USD 1.97 billion) offer to acquire the entire business and undertakings of Kencana, in the form of cash of RM 969 million (USD 322 million) and 2.5 billion new IKSB shares at the same issue price of RM 2.00. Both companies will be delisted from the exchange after the merger, and the new entity will be relisted under a different name. Continue Reading
OGX Discovers the Difference between Success and Failure – 100 bps
Last week, OGX Petroleo e Gas (“OGX”), a company controlled by Eike Batista, successfully issued $2.563 billion of 7-year senior unsecured notes in a 144A private placement. Due to strong investor interest, the deal was upsized from the original amount of $2 billion and priced at par to yield 8.5%. The spread was 611 bps over like term Treasuries reflecting Moody’s B1 credit rating. Proceeds will be used to fund the company’s expected production and development campaign and for general corporate purposes. When the net proceeds are added to cash on hand, there will be sufficient liquidity to cover these expenses until the company can self-fund through its own cash flow. While unsecured the transaction is, in fact, underpinned by potential resources of 10.8 bbls of oil, according to petroleum engineers, DeGoyler and McNaughton. The structure of the transaction is shown below.
Busy Week in the Capital Markets
Congratulations to a Whole Host of Principals and Professionals!
If there is one clear trend that is emerging in the evolution of shipping in the capital markets these days, it is the increasing role of experienced, serial issuers who control multiple companies in different market sectors. This week alone we have Ms. Frangou’s Navios on the road with a high yield bond, Mr. Fredriksen’s Golar on the road with an IPO and Mr. Georgiopoulos’ General Maritime recapitalizing its balance sheet with offerings of both debt and equity. Danaos and DryShips rounded out the week’s activities.
Skillfully blending fresh equity and debt with a generous term out of its current debt facilities, the team at General Maritime announced two transactions this week that successfully achieved the desired result; raising ample liquidity to ensure the company’s financial health with minimal dilution to its existing common shareholders. A transaction of this sensitivity, scale and complexity requires the skill and cooperation of a broad team of people.
The same can be said for any one of this week’s deals, so we would like to extend our congratulations to the key players: Nordea, DnB, Jefferies, Dahlman Rose, Citi, BoA Merrill Lynch, Morgan Stanley, Deutsche, Evercore, S. Goldman, Credit Suisse and, of course, long time General Maritime supporter Oak Tree, who all worked hard to make this one week a week to remember.
Marine Money upcoming conferences, please visit www.marinemoney.com for more details:
Houston, May 4
Istanbul, May 11
Oslo, May 26
Marine Money Week, New York City, June 21-23
“Eleven Thoughts for 2011”
We genuinely appreciate someone putting himself out there by taking a position on the issues of the day. In his Dry Bulk Outlook for 2011, Gregory Lewis of Credit Suisse looked into his crystal ball raised some very interesting questions/ thoughts for the upcoming year and beyond, which we thought were worthy of repetition. We will put these in a time capsule and open them in twelve months and grade him on his performance.
Distress Sale or a Steal – It’s All in One’s Perspective
After a protracted sale process, which began in early 2010, Affinity Equity Partners sold its 54.7% interest in Jaya Holdings for SGD 202.6 million ($158 million) with the intervention of Credit Suisse as sell side advisor. Purchased at the height of the credit boom in 2006, Affinity had acquired its stake in Jaya, which builds and operates offshore supply vessels, through a vehicle called Nautical Offshore Services, a private equity fund. As a result of the economic turndown in 2008 Jaya was unable to service the $233 million loan used to acquire the shares making the exit necessary.
“…Ask and you shall receive…”
The overriding theme of capital being available to existing companies continues. Both DHT Holdings Inc. (“DHT”) and Teekay Tankers Ltd successfully concluded overnight follow-on equity offerings last week and both were well received.
DHT initially announced plans to offer 8 million shares in an underwritten public offering, “subject to market conditions.” Market conditions were certainly good with the transaction approximately 3 times oversubscribed. The offer was upsized approximately 93% to 15.5 million shares, which included an exercised underwriter’s option to purchase up to 2.025 million shares to cover overallotments. The shares were offered at a discount range of 8-10% of the closing price on February 3rd of $5.08. The strong demand resulted in the transaction being priced at $4.65/share equal to a discount of 8.4%. Proceeds will be used for general corporate purposes, which may include, without limitation, vessel acquisitions, business acquisitions or other strategic alliances, reduction of outstanding borrowings, capital expenditures and working capital.
The Official Guide To Marine Finance Providers
Shipping Index
