Taking Care of Business

While we know the capital markets are abuzz with activity, there are still the mundane but important things that must be taken care of. On Tuesday, General Maritime amended its $750 million credit facility with Nordea, DnB NOR and HSH Nordbank, as joint lead arrangers and joint bookrunners (the “Credit Facility”) to permit the incurrence of indebtedness under the new $372 million credit facility being utilized for the acquisition of the Metrostar vessels.
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In Some Respects, a Return to Normalcy

This week Dealogic published its first half 2010 Bookrunner and MLA Tables for Syndicated Shipping Loans and the news was still dismal but in some respects hopeful. In terms of the big picture, while dollar volumes continued their downward trend, the number of deals in the first half actually increased slightly indicative of, perhaps, less capacity or more focused lending. While the number of club deals increased slightly, from 19 to 23, the deal value declined in proportion to total volume intimating at the revival of the larger syndications. And finally, approximately 90% of the dollar volume was new business rather than refinancings, which is indicative of an improving credit market.  Illustrative data are shown graphically herein.

But, for our readers, it is truly the standings that matter as they represent a scorecard of their performance for the first half of the year. While there was shifting in the standings compared to a year ago, the bookrunner table remained relatively stable. Mitsubishi UFJ displaced its fellow Japanese bank, SMBC for the pole position, while DnB NOR moved into second pushing Nordea into the 4th spot. Outsiders from a year ago, Credit Agricole CIB and ABN AMRO found spots in the top ten this time around. In terms of number of deals, DnB and Mizuho had a substantial lead recording 9 and 8 deals respectively far outpacing the remaining bookrunners. Finally, market share is clearly more concentrated at the top compared to the comparable period last year.
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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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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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Tinker to Evers to Chance

The shipping version of this famous baseball double play combination is Angelopoulos to Georgiopoulos. Like Eyjafjallajokull, a dormant volcano that was quiet for centuries, Peter G’s companies erupted with news of acquisitions, some known and others new. First, the much-publicized acquisition of five tankers by General Maritime Corporation from Mr. Angelopoulos’ Metrostar Management Corporation was formally announced. Genmar has agreed to acquire five VLCCs, with an average age of 4.2 years, and two Suezmax newbuildings, to be delivered in 4Q 2010 and 2Q 2011 for an en bloc price of approximately $620 million. The seven double hull vessels are expected to be delivered between July 2010 and April 2011 and will effectively increase the size of the fleet in tonnage terms by 50%, while improving the fleet’s age profile. Moreover it increases Genmar’s exposure in the VLCC market from 2 to 7 vessels. Two of the VLCCs have time charters, which expire in the 1Q 2011, with the balance being charter-free upon delivery.

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Markets In Disarray

The equity markets can best be described as volatile, although that characterization may be kind, as they seem to be heading in one direction only. Two companies, Ridgebury Tankers and Navios Maritime Acquisition have braved the onslaught but we suspect would have preferred a better choice of timing. Unlike the preceding IPO offerings, Crude Carriers and Scorpio Tankers, that took place earlier this year, Ridgebury is not the master of its fate. Specifically, its vessels are on option from a third party seller, Teekay, as opposed to an affiliated party, which implies certain time limitations. Despite the switchover from the Gemini to Heidmar pool, they remain on the road for a second week. As a firm believer in no news is good news, we remain hopeful that Bob Burke and his team along with Jefferies will be successful.

Clearly, Ms. Angeliki Frangou leads a charmed life or is an extraordinary negotiator. Despite the uncertain markets and a preliminary vote that was largely against the acquisition of a tanker fleet of 11 product carriers and 2 chemical tankers, shareholders of Navios Maritime Acquisition approved the transaction on Tuesday thereby avoiding the necessity of Navios Maritime Holdings becoming the owner/operator of the tonnage. According to Chris Wetherbee of FBR Capital Markets, the company was able to secure a 60% plus one majority vote from shareholders, but expects Navios’ ownership stake will likely be higher than its 33% target, as it likely purchased shares from dissidents. With three public companies under her purview, Ms. Frangou is approaching Peter G’s record of four. We are in awe of the capacity of these two industry leaders to manage successfully these distinct companies in different sectors with distinctly different shareholders.
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Marine Money Capital Market League Tables

Deutsche, Morgan Stanley, DnB NOR, JP Morgan, Pareto and Citi Top League tables from Busy start of the year

By almost every measure, the start of 2010 has been a good one for those working in the capital markets for shipping. Over $2 billion has been raised in the US public equities markets, while in excess of $2 billion has been raised in the Western public debt markets.  What is more another $2 billion in shelf registrations have been filed, with many additional projects at various stages of development.

Part of the story for the first part of 2010 has to be shipping’s remarkable ability to have avoided the catastrophic meltdown so many predicted.  But, perhaps, an even more dramatic story has been the sure arrival of the influence of the public shipping company, with its nearly instant access to capital with which to take advantage of opportunity.

Marine Money’s recent survey of the bank and investment banking communities (see the May issue of Marine Money published shortly for more details) showed that by a wide majority public companies currently do and would continue to enjoy greater access to funding, and therefore a competitive advantage.
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A Tanker Saga

On Wednesday, Arne Blystad went to market to raise equity for a new pure play large tanker IPO, Saga Tankers ASA, which will acquire three VLCCs from companies controlled by Blystad with the fourth on subjects. The company is looking to raise $80 million or $120 million in a private placement, however it intends to list the shares on the Oslo Axess in mid-June. For investors, the main attraction will be the full dividend payout model.

Constructed at Daewoo Shipbuilding, two of the VLCCs were built in 2000 with the third in 1995. The two younger vessels were valued at $69 million each, even though one is spot and the other is on time charter through Q3 2012. The 1995 built vessel is valued at $49 million and is employed in the spot market as well. The en bloc price is $187 million, excluding the option vessel, which is financed with the proceeds of the offering, the existing bank debt and an in-kind payment from the seller. The sources and uses of funds, as well as the pro forma percentage ownership is shown in the chart above for both the three and four vessel deals.
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Announce Deals; Get Check; and List on the NYSE

Only John Fredriksen can announce a deal a deal on Tuesday and have financing in place the same day. It has been a very busy week for the management of Seadrill who while in the midst of these transactions travelled to NY to open the New York Stock Exchange in honor of the listing of the shares here. The common theme here is growth capital.

It all began on Monday, when Seadrill acquired an additional 1.3 million shares in Scorpion Offshore at a price of NOK 36 per share. With this purchase, Seadrill now controlled ~36 million shares or 40.1% of the outstanding issued shares, triggering an obligation to make a mandatory cash offer for the remaining shares or reduce its holdings below that threshold within 4 weeks.
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The More Things Change; the More They Stay the Same, Relatively Speaking

Last year, we began our discussion of Dealogic’s 1Q 2009 Syndicated Shipping Loans Tables with the following sentence: “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 finance world has tipped eastward.”  However, we also should have recalled from our studies of Eastern religions that nothing is permanent and the world is forever changing. In a diminished quarter, in volume terms, the Europeans have come back, but still the number one spot in both the Bookrunner and MLA table has gone to a Japanese bank, Mizuho, followed by perennial leaders DnB NOR and Nordea. Mizuho’s finish is an outstanding accomplishment having moved up from the middle of the pack to pass it’s main local competitors, SMBC and Mitsubishi UFJ. Despite a fair amount of movement in the standings, it is still early in the year and we are not ready to make a call with respect to the earth’s axis. We leave you to peruse the tables and make your own judgments with respect to how the banks finished.
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