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

No Hype. We Delivered!

Our Chairman’s promotions are sheer artistry and we constantly marvel at these masterful gems. Of course, there are issues with punctuation but why let that get in the way of a great pitch. The amazing thing is that despite his protests otherwise, he really does get it. Our problem is that he is rubbing off on us and we are moving from analytical and objective to the dark side where it’s all about the love as both Matt and he are fond of saying. In the case of this year’s Marine Money week, there is no doubt we got it right. The numbers speak for themselves. This year we went out on a limb denoting the theme as the Comeback or Confidence Returns to Ship Finance. Whether or not that was the case and we believe it is, 1,078 registered guest wanted to hear the answer. This was a new record surpassing 2008’s 1042 guests. Uncertainty + optimism trump a boom.

We relish the awards afternoon. We devote a great deal of energy, although far less than the dealmakers themselves, in choosing the transactions from the many submissions we receive and it is a pleasure to see the winners bask in the recognition they rightfully deserve. It is also educational as the latest structures and ideas are on display for all to see and take advantage of as appropriate. Nigel Thomas and Dan Rodgers of Watson, Farlay & Williams did a masterful job moderating the session which included presentations by Sheldon Goldman, Efthymios Bouloutas of Marfin, Ronny Bjornadal of Nordea, Sean Durkin of NSF, Gerrit Parker of Citi and Craig Fuehrer of Deutsche Bank.
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Wedding Season or Offshore Consolidation Takes Two Giant Steps

Monday was a big day in the offshore sector with two major transactions announced. First BW Offshore (“BWO”) made a voluntary exchange offer for all of the shares of Prosafe Production Public Limited it does not currently own. The company is offering 1.2 BWO shares and NOK 5.25 in cash for each share, which consideration equates to NOK 16.21 based upon Friday’s closing price, valuing Prosafe at approximately NOK 4.1 billion or a 17% premium to Prosafe’s closing price on Friday. BWO currently owns directly or indirectly 23.88% of the total outstanding shares with a wholly owned subsidiary owning a further 6.1%. Presently BW Group owns 66.95% of the total number of shares in BWO and will be diluted to approximately 47% to 49% shareholding in the combined company based upon an acceptance level of between 90% and 100%. The combination will create an FPSO company with the diversification, presence, resources and competence to meet the increasing requirements from both clients and regulators.

BWO will finance the cash consideration from available credit facilities. In connection with the offer BWO has established a new bridging credit facility of $1.1 billion from BW Group on competitive terms with expiry in November 2011. The new facility together with the availability under the existing credit facility of $1.5 billion will be sufficient to finance the entire cash consideration and refinance Prosafe’s existing credit facilities, while providing capacity for growth.
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Dismantling?

It is a sad moment, when a company is forced by circumstances to sell pieces of itself, particularly when that company has been involved in shipping for 127 years. In that vein, Camillo Eitzen & Co. (“CECO”) announced Tuesday the sale of its majority shareholding (74.43%) in dry bulk operator, Eitzen Bulk Shipping to Navieras Ultragas Ltda, a Chilean shipping company, for $92.9 million or $5.07 per share. Navieras will be required to submit a mandatory public offering for the remainder of the shares meaning Eitzen may hold the record for the shortest life as a public company having begun trading on the Copenhagen Exchange only last December.

DnB’s Glen Lodden found some good news amidst the bad suggesting that CECO received a good price for their shares. The shares had opened at DKK 25.10 with the offer made at DKK 31.00 per share. Based upon the sale, Mr. Lodden’s calculation of NAV increased from NOK 3.66 to NOK 6.51. He maintains his buy recommendation but will revise the target price downward due to the weakness in Eitzen Chemical’s shares.
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A Wisp of Spring

While sitting home in the midst of a blizzard and with the knowledge that the omniscient Punxatawny Phil announced on Ground Hog Day that we still have 6 more weeks of winter, we know, nonetheless, that spring will inevitably come. Yesterday we attended the morning session of the Hellenic/Norwegian-American Chambers of Commerce 16th Annual Joint Shipping Conference and we felt similarly that the winter of ship finance may also break. While the tone wasn’t exactly upbeat, there certainly were no dirges being sung and it, in fact, appears by their comments that the bankers may be ready and able to return from their year plus long sabbatical. But as Nikolai Nachamkin of DnB and the conference co-chairman would remind me, I am getting off topic.
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All Eyes Are On Genmar

We know that General Maritime’s dynamic duo, Messrs Georgiopoulos and Pribor are on the road marketing their $300 million senior unsecured notes offering due in 2017 and so, while they are busy selling we thought we would take a read of the high yield market.

Earlier this week, Navios Maritime Holdings closed its successful $400 million private offering of first priority ship mortgage notes due in 2017. Rated BB-/Ba3, the coupon on the notes was 8.875% and was priced to yield 9.125%. The company escrowed $105 million of the proceeds to provide additional financing to complete the purchase of two new vessels with the balance used to repay existing credit facilities.
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Hard Numbers

Moving from the theoretical to the concrete, the following examples illustrate the real cost of today’s crises:

Genco Bites the Bullet
On Tuesday, Genco Shipping & Trading (“Genco”) made the correct but painful decision to cancel the previously announced acquisition of six dry bulk newbuildings, including three Capesize and three handysize vessels, from Lambert Navigation et.al., at an aggregate purchase price of $530 million. As part of the agreement, the sellers will retain the deposits totaling $53 million. The three Capesize vessels and three Handysize vessels are being constructed in the Daehan and Jinse shipyards in South Korea, with deliveries commencing in the 4th quarter 2008 (two Handysize) through 2009.

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Sub Prime Potential

In Korea today the subprime crisis is all about the shipping industry. The historic close relationship between shipowners, yards and Korea’s largely government sponsored banks is raw in a way all sides wish it were not.

Owners looking for funds are finding banks constrained by liquidity and a rising cost of capital, while small and medium size yards suffer under a thin refund guarantee market and concerns that banks will not fund the next round of deliveries. Banks, on their part, bemoan their inability to step up for owners and worry that an influx of foreign banks such as SocGen, Garanti, DVB, and DnB will alter the future landscape by developing relationships with owners today. The reality, though, is that it is much more likely banks like KDB will create new solutions, providing both themselves the returns they seek and their clients the funding that they need. Meanwhile for the moment orders must be financed and Korea’s growing community of owners is looking for funds.
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Who’s Lending?

According to various sources, Nordea and DnB, having escaped the subprime debacle, continue to build market share. Other European banks remain somewhat constrained lacking the support of their central banks. In Germany, we understand HSH Nordbank is very active and now taking a look at the offshore business.

Transaction Report

It was great news for the equity markets this week when Safe Bulkers got out its Merrill Lynch and Credit Suisse- led IPO. While the deal did price $1.00 below its $20-$22 target range, it’s been so long since we’ve seen any shipping IPOs that the very fact of a new deal getting done is a good sign. But the real interest this week was in the oil market, and Marine Money could not have asked for a better time to host its 10th annual Norway Ship & Offshore Finance Forum. The gathering was full of those hearty souls that will shape the next generation of oil production and dis­covery, financing and building machines to pull oil out of 12,000 feet of water, through thousands of miles of crust­ed salt, and anywhere else it can be found. The gathering formed the epicenter of the activity that is the focus of the better part of the world’s citizens.

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