No Pressure Just a Must Deal

General Maritime pulled out all the stops retaining a litany of Wall Street’s bankers to assist in the sale of its common stock needed to complete the financing of five VLCCS and two newbuilding Suezmax tankers from Metrostar. Debt financing is in the process of being arranged, with Nordea and DnB NOR, in the amount of $372 million, representing 60% of the purchase price. The facility is conditioned upon a successful equity offering to make up the remaining balance of $248 million plus any working capital needed. In this period of volatility in the markets, this is no simple deal. Adding further complications was S&P’s recent downgrade of the company’s debt to a B rating. This rating however needs to be put in the context of S&P’s overall view of shipping, which considers Teekay and OSG as BB and BB- rated respectively a few notches above Genmar’s.
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Discretion Is the Better Part of Valor

When it comes to dealing with shareholder activism, management has to quantify the costs as well as the time and energy consumed in its response. In all these respects, it is unlikely that management can win. It is spending money on lawyers and advisors and remains distracted from the day-to-day running of the company. And so at the end of the day, it generally succumbs to the minority shareholder’s gentle coercion, in polite terms, but what is, in essence, blackmail, in order to do what is best for the company or at least move on. A small company, in particular is doomed to this fate.

This is the position DHT Maritime found itself back in March, when MMI, owners of 9.7% of DHT’s outstanding shares, let its feelings about the quality of management and its decisions be known. All would be well, in their mind, if their expert, Bob Cowen, with his 25 years of maritime experience, were to be added to the board and thus a proxy contest ensued. The issue was resolved this week with DHT relenting by agreeing to expand the board from four to five directors and appointing Mr. Cowen to that new seat, which term expires in 2011. In addition, MMI has the right to nominate an additional director at DHT’s 2011 annual meeting for a term expiring in 2014 and DHT has agreed to support that nomination. In exchange, MMI has agreed to a standstill and will not solicit proxies for or participate in a contested election relating to DHT directors or submit any proposals at shareholder meetings through the completion of the 2011 annual meeting. Importantly, should MMI’s shareholding fall under 5% of the issued and outstanding shares as of the date of the agreement, the board seat will be terminated. And finally coming under the guise of adding insult to injury, DHT has indemnified MMI for its fees and expenses incurred with respect to the proxy contest up to $150,000.
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Talent Finding New Homes!

Dahlman Rose & Co Add Powerhouse Chairman
Well know financier Kim Fennebresque has joined Dahlman Rose as the firm’s Chairman.  The move continues the investment bank’s enormously successful development built on commitment to client service, top shelf independent research and superior personnel recruitment over the past half dozen years.  In fact the current move should accelerate the firm’s growth and strengthen it’s already considerable platform.

Mr. Fennebresque joins Dahlman Rose after a distinguished career, which started at The First Boston Corporation in 1977.  His career path since then could be used as a business school model for just how to gain valuable experience, contacts and skills needed to lead a successful investment bank. Mr. Fennebresque left First Boston in 1991 to join Lazard Freres as a General partner where he remained until joining UBS to lead that bank’s Mergers & Acquisitions and Corporate Finance departments.

Then in 1998 he joined SG Cowen, the US subsidiary of Societe Generale.  He served as President, CEO and Chairman for most of his tenure at Cowen.  It was that sort of reputation which led the US Treasury to ask him to join the Board of GMAC.
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Here Come the IPOs

This week two IPOs, one dry and one wet, hit the road with well-known sponsors. First was the Genco inspired BDI play, Baltic Trading Limited, which was followed by Mr. Marinakis’, of Capital Products Partners fame, large tanker vehicle, Crude Carriers Corp. These followed quickly on the heels of the recent Scorpio offering.

BDI Proxy
This was one of the first opportunities we had to watch a road show presentation on the great equalizer, “RetailRoadshow” (http://www.retailroadshow.com/index.asp), a website designed to put retail investors on a level playing field with the institutions. The presentation of Baltic Trading Limited was expertly handled, as one would expect, by Peter G. and John Wobensmith, who will respectively fill the positions of Chairman and President of the new company.
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Back in the Public Saddle

On Tuesday, Scorpio Tankers Inc. filed a preliminary registration statement for an initial public offering of its shares. While lacking in specifics, there is still much to be gleaned. The equity raise, including the green shoes is in the range of $150 million which amount will be supplemented by a new credit facility. Proceeds will be used to re-pay debt and for fleet expansion, targeting modern tankers from 35,000 DWT to 200,000 DWT, which are generally not older than 5 years of age.
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Paying the Bill

On Tuesday, after the market closed, Aegean Marine Petroleum Network announced that it would utilize its recently effective shelf registration to issue 3,906,000 shares of its common stock in an underwritten public offering. The closing price of the shares was $32.45, which would equate to an equity raise of approximately $126 million on a gross basis. The next day, in a market roiled by news of restricted lending in China, the shares traded up $0.23 to $32.72.
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Catch-22

It’s not only about new money. Keeping your existing credit facilities may soon become a concern. In his recent report on Omega Navigation, Omar Nokta, of Dahlman Rose raised the issue in his discussion of Omega’s credit facility with HSH Nordbank, which is scheduled to expire in April 2011.

While not a pressing problem for most, it certainly is something to be aware of generally, particularly in the case of weaker credits. Shedding assets is a sure way of improving banks’ capital ratios, which is the means to increased lending. Of course, the bigger question is how does one go about refinancing the facility your banker does not want?

The Not So Invisible Hand

In the midst of its 3rd quarter earnings report, General Maritime disclosed that it had entered into a broad amendment of its 2005 credit facility led by Nordea this week. It would appear based upon these disclosures, that the banks are perhaps becoming more proactive in protecting their interests. The time of waiting and seeing what will happen has passed. Simple waivers, if this is an indicator of future trends, will not be granted. Amendments will require reduction of exposure, tighter covenants, and higher costs. But it is the quid pro quo for the amendment that makes this one particularly interesting. The amendment is contingent upon a re-capitalization of the balance sheet through the offering of non-amortizing senior unsecured notes (but with subsidiary guarantees) with a minimum term of five years. The offering must be consummated by November 30th and provide at a minimum net proceeds of $230 million.
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Size Does Not Matter

Following in the footsteps of it’s earlier offering in July, which raised net proceeds of $16.7 million, FreeSeas Inc. has filed a preliminary registration statement for the sale of up to $15 million of common stock in an offering to be led by Dahlman Rose. The new registration statement provides greater flexibility to raise capital than its earlier registration statement. In preparation for this as well as future offerings, shareholders had earlier approved an increase in the authorized number of shares of stock from 40 million to 250 million.

Proceeds will be used for the purchase of additional vessels, repayment of debt and general working capital purposes. An amount equal to 10% of any capital market proceeds, up to a maximum of $3 million over the lifetime of the facilities, shall be applied to the prepayment of the Hollandsche Bank-Unie facilities.

“BDI” and We Don’t Mean the Index

Leave it to Peter G. Current thinking suggests that the investing world is trading dry shares as a proxy for the BDI. So what does Peter G do? Through his dry bulk operating company, Genco Shipping and Trading (“Genco”) he forms a new subsidiary called interestingly enough, Baltic Trading Limited (“Baltic”) The goal of the new venture is to provide shareholders with the opportunity to invest in a company with a strategic focus on the drybulk spot market, which utilizes little to no leverage and seeks to distribute regular dividends based upon earnings.  This, of course, is in contrast to its parent, which is more time chartered focused.

Genco then announced on Wednesday that the new company, to be led by John Wobensmith, had filed a registration for a proposed initial public offering of common shares (Class A shares). With only a red herring filed at the time of writing, details are scant, however the registration document indicates a maximum offering of $230 million. The book runners are Morgan Stanley and Dahlman Rose.
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