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Working for the Government – Eksportfinans Unwinds
Heresy! Despite adherents’ strong belief in capitalism, it was the private solution that failed this time. Eksportfinans ASA, the operator of Norway’s 108-scheme (subsidized fixed interest CIRR loans), was caught by the EU’s Capital Requirement Directive that limits large exposures. In order to comply with the requirements, the company needed to be re-capitalized or required a permanent exemption from that rule. Unfortunately, Eksportfinans and its largest shareholders, DNB Bank (40.0%), Nordea Bank (23.21%), the Kingdom of Norway (15.0%), and Danske Bank (8.09%) could not come to terms on a plan for re-capitalization that would ensure adequate export financing and the government deemed a waiver unlikely.
As a consequence, the government took over the 108-agreement lending scheme, which represents 70% of the loan book, from Eksportfinans, which it intends to replace with a state-funded scheme for export credit financing which will be administered by a government agency. Initially, the government intends to establish an interim financing scheme, managed on behalf of the government by Eksportfinans, with an initial funding of NOK 30 billion, until the permanent scheme is operational, which is expected to be no later than July 1, 2012. During this period, new commitments for CIRR loans will be granted by Eksportfinans, as administrator, with the assets and commitments to be taken over by the newly established agency.
Batten Down the Hatches – Hoegh LNG Finds It Isn’t that Easy
Despite being the hottest sector in shipping, Hoegh LNG Holdings Limited encountered headwinds in its initial public offering. The company hoped initially to sell 15-25 million shares at a price range of NOK 38 to 54 in order to raise gross proceeds of approximately NOK 810 million to NOK 945 million ($198-282 million). As part of the offering, which consisted of an institutional tranche, a retail piece in Norway and an employee offering in Norway, Leif Hoegh & Co. Ltd, the parent agreed to subscribe for up to $20 million worth of shares to maintain a minimum 55% interest post-IPO and over-allotment option. For further details, see the Guts of the Deal below.
Plop-plop, Fizz-fizz, Oh What a Relief It Is” – TORM Extends
On Wednesday, TORM was able to announce an actual, as opposed to rumored, refinancing of its $900 million revolving credit facility with Danske Bank, BNP Paribas, HSH Nordbank, and SEB which was scheduled to mature in 2013 with a bullet payment of $630 million. Conditioned upon a cash equity raise of $100 million, likely a rights issue, to be completed by December 15th, the banks have agreed to extend the maturity to 2015, when it matures with a bullet payment of $480 million. The difference in the balloon payments of $150 million will be amortized during that two year period. The facility will retain the current covenant package and will include a market value test applicable from 2013 as well as dividend restrictions.
A Sizeable Deal and the Power of the Press – Euronav Facility
It should come as no surprise that while the banks continue to be active, there still remains uncertainty. The banks seem to have capacity but the shipping markets are not cooperating and continued deterioration will continue to make things difficult. We were reminded of DnB Nor’s Harald Serck-Hansens’s comments at his bank’s conference earlier this year where he highlighted this possibility and encouraged owners to tap the market while they can.
More Gas – Hoegh LNG files IPO
Last week, Hoegh LNG Holdings Ltd. (“HLNG”) began the IPO process. The company intends to sell 15-25 million shares with a 10% green shoe. Using the targeted price range of NOK 38 to 54, gross proceeds of NOK 810 million to 945 million ($198-282 million) are anticipated. In Norwegian fashion, the offering will consist of an institutional offering, a retail offering in Norway and an employee offering in Norway. In order to maintain an ownership position of a minimum of 55% post-IPO and overallotment, the company’s parent, Leif Hoegh will subscribe for $20 million in the aggregate of shares. Proceeds of the offering will be used to partially finance two 170,000 cbm Floating Storage and Regasification Units (“FSRU”) which will be delivered in 4Q 2013 and 1Q 2014 at an estimated delivered cost of $550 million. In addition the company has arranged a loan to daughter company, Hoegh LNG Limited, which it will guarantee, in the amount of the lesser of $272 million or 50% of the contract price of each FSRU, plus project costs of $25 million. Financial covenants include minimum equity of $200 million, minimum combined cash of $20 million before delivery of the first vessel declining to $15 million thereafter, positive working capital at the guarantor and minimum value clause equal of not less than 135% of the outstanding. After delivery, the loan term is three years based upon a 15 year amortization to a balloon. In terms of cost, there is an upfront fee of 130 bps, a margin of 300 bps and a commitment fee equal to 40% of the margin. This is just the beginning. The company also has options for 1 + 1 + 2 additional FSRUs. More details on the offering are shown below in the Guts of the Deal.
APM Goes Back to the Bond Market
Having had its first taste last year, A.P. Moller-Maersk (“APM”) returned to the public bond market a couple of weeks ago, issuing EUR 500 million of 7-year bonds with a coupon of 4.375%. The net proceeds will be used for general corporate purposes. Unsurprisingly, investor interest was strong with the bonds being more than three times oversubscribed. As a point of comparison, last year’s issue of EUR 750 million 5-year bonds carried a coupon of 4.875%. Placed by Barclays Capital, BNP Paribas, Danske Bank, HSBC and RBS, the bonds will be listed on the Luxembourg Stock Exchange.
A First
These are difficult times and, as the expression goes, there is a first time for everything. Last week, A.P. Moeller – Maersk A/S (“Maersk”) successfully placed a EUR 750 million ($1.3 billion) five-year bond with a coupon of 4.875%, which equates to 237bps over German government debt, according to Pareto. This is the company’s first bond issuance and was 6.5 times oversubscribed.
Proceeds from the offering will be used for general corporate purposes and for repayment of drawings under longer-term bank revolving facilities that will be retained as liquidity buffers.
This transaction follows a recent equity offering of $1.7billion evidencing that even for the best there is never enough liquidity.
Danske Bank, HSBC, ING, J.P. Morgan and Nordea placed the bonds, which will be listed in Copenhagen and Luxembourg.
More Normal?
Dealogic released its first half tables on Wednesday and they resembled, at least in terms of names, what we more typically expect, particularly in the case of the bookrunner table. Nevertheless, the newcomers from the 1st quarter did retain positions on the leader board. Total deal value grew to $17.5 billion comprised of 50 deals, versus the year earlier $43.1 billion comprised of 165 deals, continuing an expected trend. However on a quarter over quarter comparison, transaction volume declined a substantial 47.3% this year marking an even more worrisome trend.
The top 20 bookrunner table underwent the most change as it filled out from 8 banks in the first quarter to 17 in the first half. SMBC held on to first position increasing its volume by 71% and its market share to 6.5%. Nordea returned jumping to 2nd place with a 3.5% market share. SBI Capital fell to 3rd place with Mizhuo and DnB NOR rounding out the top 5. DnB Nor’s placement is significant and representative of its size and importance as its lending, oft repeated, is strictly limited to run-off. In addition to Nordea, the usual European suspects are back, including KfW, BNP Paribas, HSBC, Deutsche Bank, Citi, SG CIB and Calyon. RHB Investment Bank of Malyasia and Axis Bank of India were new entrants and added to the already significant Asian representation.
Deal or No Deal?
Rumors in the market are rife about a new massive financing arranged for A.P. Moller Maersk (“APM”). According to Dealogic, the banks involved, as is customary, have reported to them that APM has entered into a $6.5 billion 7 year credit facility. In fact, as an industry source suggests, and Dealogic confirms, this is an old deal in the same amount that has been amended. And, as such, there is no new money involved.
In a precautionary move, given the uncertain credit markets, the amended transaction has been structured as a forward start facility. Upon expiry of the existing facility, the new one commences. In this instance, the start date is in 2012. The mandated lead arrangers on both include Citi, Danske Bank, HSBC, JPMorgan, Mitsubishi UFJ and Nordea.
Few Surprises But Nonetheless Interesting
A quarter, particularly the first one, does not make a year, but according to the first quarter Dealogic tables, which we received today, the axis of the ship financial world has tipped eastward. Looking at the Top 20 Bookrunner Table of which there are only eight, Asian banks populate four of the places including the three top spots, which are held by SMBC and SBI Capital Markets (State Bank of India), and Mitsubishi UFJ Financial Group (“Misubishi UFJ”) respectively. In the case of the Top 20 MLA Table, Mitsubishi UFJ Financial Group and HSBC took the top two spots and three other Asian banks populate the top 20. Total volume for the quarter was $10.6 billion, continuing the downward trend since 2007. However for those who see a glass as half full this quarters volume is in line with the comparable periods in 2005 and 2006. Is it too early to say we are reverting to the norm?
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