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What We’re Reading
Our interests are varied and we are fortunate to receive many different and distinct publications covering sectors other than shipping and offshore. There are often bits and pieces in them which we find interesting or informative. Often we find a connection to our coverage or an interesting parallel. The following comes under the category of: “we are not alone.” We hope you find the following and future selections as interesting as we do.
Helane Becker of Dahlman Rose made the following comments in her weekly research, “Takeoffs & Landings: Reviewing the Regional Airlines” (November 7, 2011)
Selected excerpts appear below:
The Regional Model is Broken and the Companies are Suffering
In this week’s Random Thoughts section we discuss our view of the regional airline industry. There are three publicly traded companies and a host of privately held airlines; the Regional Airline Association lists 61 members!
Comment: The regional airlines are barely eking out profits; it wasn’t always this way, and it cannot continue this way. Right now, the capital markets are still open to these companies, but unless the returns improve, this won’t be the case for long.
Into these Volatile Markets Goes Star Bulk
In its first follow-on offering since it began operations in December 2007, Star Bulk Carriers Corp. announced on Monday an underwritten overnight offering of 16.5 million shares based upon its previously filed $250 million shelf registration. The next day the offering was upsized to 16.7 million shares and priced at $1.80 per share, a discount of 10.4% from Monday’s closing price. While the file to offer discount is somewhat higher than the average year to date of 7.2% indicated by Jefferies, recall this is shipping and the markets remain volatile. Net proceeds were approximately $28 million. In addition, the company is allocating the usual 15% of the offering or 2.51 million shares to cover over-allotments.
An Ode to Magicians
At showtime, it all looks easy, but the weeks preceding Marine Money Week are a whirlwind. It’s interesting being an insider and a somewhat dispassionate observer. You hear the plans beginning in March. The phone calls and emails begin soon after as the agenda takes form and speaker requests are sent. Worry and frustration sets in. Is the agenda good? Will we get the speakers we need? Has anyone signed up? What can we do that will make this better than last year’s? Conference calls between Guilford and Stamford are many. Then the artist of promotion sits down at his computer and starts to whip out one promotion after another, each one better than the preceding. The trickle of registrations begins. Companies plan their events around the week. First Morgan Stanley announces its investor conference, and then a newcomer, Ship Finance follows suit with an investor/analyst meeting. As if a party planner was involved, the social events begin to fall into place as DnB Citi/Watson Farley, Jefferies, BNP, Dahlman Rose and HSH Nordbank all do their thing. Still we worry. It’s hard to get the moderators and speaker’s attention. As envelopes are stuffed and badges made, the numbers creep up and begin to approach last year’s. Jim still worries and runs into the city to help some moderators and calm their nerves. Then there’s MOMA, something new and therefore worrisome, but not to worry Lorraine’s taken charge. And then suddenly its Tuesday and as always is the case it all falls into place. Jim will remain nervous till the end but it is all under control and no one knows differently. The Marine Money magicians have pulled it off again. Kudos to Jim, Matt, Mike, the irrepressible Lorraine, Julia, Elisa, Cari, Margareta, Mike, Andrea Sarah, Adam and this year’s summer interns, Maren and Florian for a job well done.
Partial Spin-Off to Follow-on – Diana Container Raises Equity
Back in December, Diana Shipping Inc. spun off 80% of its 55% interest in Diana Containerships Inc. by distributing to its shareholders 2,667,066 shares. The shares began to trade on NASDAQ in January of this year.
Subsequently, on May 9th, Diana Containerships filed an F-1 registration statement for a follow-on offering of common shares. The shares closed that day at $12.64 per share. On May 31st, the company filed a press release announcing a follow-on offering of 14 million shares and a concurrent $20 million private placement of common shares to Diana Shipping. The offering, which was upsized to 14.25 million shares due to investor interest, was priced on June 10th at $7.50/share, a 27% discount from the closing price the day of the public announcement. While substantial, it needs to be put in context. On May 2nd the Dow Jones Industrial Index hit a recent high of 12,807.36, which began a steady six week market decline, its longest slump since 2002. This was certainly not a propitious moment for an equity offering. In fact from the date of filing to the date of pricing the market as measured by the DJI fell 5.8%. If in fact the window for equity offerings was open it must have been barely a crack with investors clamoring for a substantial discount given the falling market and only being receptive, in this instance, because of the good name attached to the deal.
Marriage at Haakon VII’s Gate 1 – DHT to Acquire Saga Tankers
There are certainly many reasons for a merger, but the fact that the two companies’ offices are separated by two floors, while not meaningful, does make the logistics of the transaction easier, even though there are only two employees involved. On a less frivolous note, the proposed acquisition of Saga Tankers ASA by DHT Holdings, Inc. makes perfect sense for both parties. For DHT, it clearly was a means to continue the growth trajectory that began under the new management team and without additional leverage. For Saga shareholders, it can be viewed simplistically as a swift and timely exit. But, in fact, Saga shareholders now have a far better platform to participate in the tanker market.
Scorpio on a Roll – Enters into a New Credit Facility, Files Shelf, Orders Ships and Executes Follow-on
Earlier this month, we reported on Scorpio Tankers Inc.’s new $150 million credit facility and filing of a shelf registration to issue up to $500 million of securities. Last week, they put these to good use. With sole bookrunner Morgan Stanley and co-managers, Dahlman Rose, Evercore and Fearnley Fonds, the company sold 6 million shares in a successful follow-on offering, which was upsized from the originally intended 5.5 million shares due to strong demand. The shares were priced at $10.50, a discount of 6.67% from the closing price prior to the announcement. The shares closed the next day at $10.75 with 1.065 million shares traded versus average volume of 88.8 thousand shares. Subsequently, the underwriters exercised their over-allotment option to purchase an additional 900 thousand shares, bringing total net proceeds to approximately $68.4 million. Details of the offering are shown below in the Guts of the Deal.
Cool, Steady Heads Prevail – Genmar Restructures Liabilities
Banking on its relationship with its long-time investor, Oaktree Capital, General Maritime Corporation successfully raised $200 million in new capital, which formed the cornerstone of a restructuring of its balance sheet designed to improve liquidity largely through the reduction of its near-term debt obligations. The important side effect of the transaction was a reduction of the cash flow breakeven rate to a level commensurate with today’s weak tanker market.
Peter G was here before in the late 1990s, another weak market, but this time it was much tougher due to the large commitments resulting from the acquisition of the Metrostar fleet. As one can see from the result, this was without a doubt one difficult negotiation and we can only imagine, given Peter G’s penchant for cigars, long hours in a dark smoke-filled room. But, of course, we would have to imagine it since City ordinances prohibit smoking and Peter G gave up cigars quite a while ago. But why let facts get in the way of a good image.
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
“…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.
Stop Presses
Just as we were ready to publish, DHT Holdings and Teekay Tankers announced follow-on equity offerings. DHT intends to offer 8 million shares and will use the proceeds, approximately $40 million based upon today’s closing price, for general corporate purposes. The joint bookrunning managers are UBS, BofA Merrill Lynch and Citi. Dahlman Rose will act as Co-manager and Carnegie as sales agent in Scandinavia.
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