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For Visibility & Liquidity, Pacific Drilling Comes to NY
On November 7th, Pacific Drilling S.A., a company controlled by the Ofer family through Quantum Pacific Group, announced an initial public offering of six million of its shares, which will be traded on the New York Stock Exchange. Previously in April 2011, the company completed an offering of 60 million shares to qualified international and U.S. investors In accordance with Regulations S and D under the Securities Act of 1933. These shares currently trade on the Norwegian OTC List. Following the completion of the IPO, 41.85 million of these shares sold pursuant to Regulation S may be re-sold immediately in the U.S. market creating a substantial overhang. Post-offering, Quantum Pacific will own 150 million shares representing 69.4% of the total outstanding shares.
GGS Bond Starts a Resurgence of Capital Raising
A recurring theme of this year is the ease with which the offshore sector can raise capital even in this difficult market. The last two weeks have been no exception. During the first week of November, Petroleum Geo-Services ASA announced an offering of $300 million senior unsecured notes due in 2018, which would be guaranteed on a senior basis by certain of the company’s subsidiaries. The notes were priced a week later with a coupon of 7.375% and issued at 98.638% to yield 7.477%. Proceeds will be used for general corporate purposes and may include the re-purchase of the outstanding principal amount of its existing convertible notes. With little disclosure from the company, we were only able to learn that Barclays led the deal and DnB NOR Markets was one of the co-managers on the transaction.
Norwegian Bond Market Reopens with a Rush
Mark the date – November 4th – on your calendar. After a hiatus, the oil service companies returned to the Norwegian bond market en masse or so it seemed. On Friday, Petroleum Geo-Services ASA announced a $300 million offering of 7-year notes. This was quickly followed by a $150 million offering of 5-year 2nd lien callable bonds by Chloe Marine Corporation. We then awoke on Monday to the announcement that Songa Offshore was in the market with a 5-year senior unsecured bond issue in the range of NOK 1,150 to 1,400 million. For this week’s issue, we will provide in-depth look at the project bond issued by Chloe Marine.
Deep Star Metro Ltd, a joint venture of Metro Exploration Holding Corp. (controlled by Theodore Angelopoulos’ Metrostar Group) and Odfjell Offshore Ltd. (a subsidiary of Odfjell Drilling) came to market this week to finance its second drillship, the Deepsea Metro II (“DSM II”), a Gusto P10000 6th generation UDW drillship owned by Chloe Marine and under construction at Hyundai with delivery scheduled for November 30th. The vessel has been chartered to Petrobras (rated A3/BBB-) for 3-years at a rate of approximately $438,000/day plus a bonus of up to 10% of day rate based upon efficiency. Metro Exploration was established by Metrostar to expand into the offshore energy sector through the building of two UDW drillships. Given Mr. Angelopoulos superb timing and track record we expect the assets will be sold to the larger operators contributing to Mr. Angelopoulos’ wealth.
Archer Finances Great White Energy Services Acquisition
Last month, Archer Limited agreed to acquire Great White Energy Services (“GWES”), a company which provides horizontal and directional drilling services, pressure control and pressure pumping for $742 million. The acquisition gives Archer an entry point into the rapidly expanding “frac” market in the US as well as effectively doubling Archer’s US coil tubing and directional drilling capacity.
Soon thereafter, the financial markets collapsed and the company renegotiated the purchase price with the seller obtaining a price reduction of $112 million to $630 million. Initially, the company planned to issue 12.7 million new shares at a price of NOK 35 in a private placement directed towards its two largest shareholders, Seadrill Limited and Lime Rock Partners V.L.P to partially finance the purchase. The offering would have raised $82 million in proceeds to Archer. In fact, due to increased demand the offering was oversubscribed with the company issuing 30 million shares at NOK 30 raising gross proceeds of NOK 900 million. Allocated 14.5 million shares, Seadrill will own approximately 145.8 million shares corresponding to a 39.81% of the issued and outstanding shares.
Odfjell and Lindsay Goldberg Close Tank Terminal Deal
Back in May, Odfjell SE and Lindsay Goldberg LLC announced their intentions to enter into strategic partnership to grow the former’s tank terminal business in Europe and North America.
Through this transaction, Lindsay Goldberg will acquire a 49% interest in each of Odfjell’s tank terminals in Rotterdam, Netherlands and Houston, Texas as well as in the greenfield project in Charleston, South Carolina. Odfjell will retain the remaining 51% ownership stake with current management remaining in place. The total transaction includes storage capacity of refined oil products and chemicals in the amount of about 2 million cbm and a total of 465 employees.
“Simplicity is a Good Thing” – Stolt Issues Norwegian Bond
With summer just around the corner, Stolt-Nielsen Limited decided to take advantage of the long daylight hours in Oslo and went into the market to issue, in a private placement, new 5-year senior unsecured bonds. Initially, the transaction contemplated an equivalent amount of $200-300 million, split between a Dollar tranche and a Norwegian Kroner tranche, in order to attract a broader range of investors. The NOK tranche was expected to bear interest at NIBOR + 450-475 bps, with the Dollar tranche interest rate expected to be in the range of 6.50%-6.75% fixed. The proposed pricing reflects an issuer rating of BB+/BB with the bonds a notch lower at BB/BB-. The bonds are non-callable for life. Proceeds of the offering will be used for funding expansion opportunities and general corporate purposes.
Seeing the Light – Golar LNG Learns From a Competitor
The MLP model is best suited for assets such as FSRUs and LNG carriers that have stable cash flows due to long-term contracts. The common units of the limited partnerships trade on yield and expected growth. Given the low interest rate environment and high demand for yield paper, the MLPs are trading at high EBITDA multiples and premiums to underlying asset value. The valuation premium gives MLPs a lower cost of capital making it an efficient way to grow and access capital.
“Every Which Way but Loose” – DnB Markets and Pareto Securities Market Structured Bond for Havila
Just when we think we have it figured out, the markets prove us wrong. Where we have believed recently that little consideration was given to structure, security and covenants, the Oslo bond market has shown us otherwise. It’s not always about yield; investors, in fact, do care. When a deal needs to be structured to deal with risk, it is.
Step Two – DHT Goes for Bonds
After successfully concluding a follow-on offering last month in which the company raised approximately $62.8 million, DHT Holdings Inc. is currently marketing a new five-year senior unsecured open bond issue in the Norwegian market. The bond is an open bond loan, under which subsequent tap issues may take place in the period from and including the issue date to and including the business day falling five business days prior to maturity. All tap issues will be subject to identical terms in all respects. The issue has a borrowing limit of NOK 600 million of which NOK 400 million will be drawn on the settlement day.
The net proceeds of the offering will be used for general corporate purposes, with the expectation that most of the proceeds will be used to fund future growth and vessel acquisitions. More details are provided in the Guts of the Deal below.
Solstad Refinances and Improves Liquidity
Last week, just prior to the start of the ski fest (described below), Solstad Offshore ASA successfully completed a NOK 700 million floating rate open bond issue, under which it drew NOK 500 million. The offering was well received and was priced at NIBOR + 4.40%. Proceeds are to be used to refinance existing bond debt and for general corporate purposes. More details are provided in the Guts of the Deal below. As promised, upon the successful launching the company bought back NOK 21.4 million of SORE01 at a price of 100.13% and NOK 89.0 million of SOFF01 at par.
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