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Distress Sale or a Steal – It’s All in One’s Perspective
After a protracted sale process, which began in early 2010, Affinity Equity Partners sold its 54.7% interest in Jaya Holdings for SGD 202.6 million ($158 million) with the intervention of Credit Suisse as sell side advisor. Purchased at the height of the credit boom in 2006, Affinity had acquired its stake in Jaya, which builds and operates offshore supply vessels, through a vehicle called Nautical Offshore Services, a private equity fund. As a result of the economic turndown in 2008 Jaya was unable to service the $233 million loan used to acquire the shares making the exit necessary.
Almost There – Aker IPO
Having successfully concluded the bond issue and secured an underwritten commitment for the refinancing of its existing bank debt with a new five year $900 million secured bank loan facility from DnB NOR, Nordea and SEB, Aker Drilling began the bookbuilding period for its IPO last week. The company is looking to raise up to NOK 3.6 billion, with the number of shares issued ranging from 189.5 million to 133.3 million depending on the price. The indicative price range is NOK 19 to NOK 27/share for the offering. Based upon the number of shares post-issue (282.5 million to 226.3 million), the shareholding of new investors would range from 58.9% to 67.1%. Finally, the post-issue market capitalization could be as low as NOK 5.4 billion to as high as $6.2 billion.
Sound Bites
The Hellenic/Norwegian-American Chambers of Commerce 17th Annual Joint Shipping Conference was held on Tuesday. It began with Morgan Stanley’s Fotis Giannakoulis telling us everything we need to know about everything to make a decision in these uncertain markets. But for us it is all about finance, so we provide below some sound bites from the conference:
DryShips Prices
On Wednesday, DryShips Inc. announced, in line with its expected time frame, that its wholly-owned subsidiary, Ocean Rig UDW Inc. has priced its private placement share offering at $17.50/share for total gross proceeds of $500 million, implying an offering size of approximately 28.6 million shares. At the conclusion of the offering, Dry Ships will own approximately 78% of Ocean Rig. The transaction is expected to close December 20th.
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“The Market Is Hot” – The Theme of Yield Continues
While the action in bonds this week continued in Norway, New York joined the fray with Ship Finance’s latest offering. The beauty of Norway’s market is its speed and simplicity but Wall Street is the place for longer tenor dollar denominated deals such as Ship Finance’s ten year senior unsecured offering.
Bonheur Bond
Based upon strong investor interest, Fred. Olsen’s Bonheur ASA successfully sold an upsized NOK 600 million three-year senior unsecured bond issue last week. With an original borrowing limit of NOK 500 million, the offering of floating rate notes was upsized by a NOK 100 million. Guaranteed by its sister company, Ganger Rolf, the notes were priced at 3 month NIBOR + 400 bps. Proceeds will be used for general corporate purposes. Details of the transaction are shown in the Guts of the Deal herein.
Investment Opportunities Within the Offshore Space in Asia
By Thor Andre Lunder, DnB NOR Markets Equity Research, Asia
Oil companies are again increasing their Exploration and Production (E&P) spending, after a temporary dip in 2009 following the financial crisis. Existing oil fields show a decline rate of 4.5% or more. This needs to be replaced by new production and enhanced oil recovery. Higher spending among the oil companies benefits the offshore companies. Although the overall picture looks strong for the offshore industry, companies and sub-sectors will, to varying degrees, benefit from the increasing activity in the E&P sector. We see good investment opportunities within several niche players in Asia, such as ASL Marine, Swiber and Ezion. With oil prices at the current level driven by the decline in production from existing fields, we expect a continued strong appetite for offshore companies from Asian and international investors.
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Pooling Containerships
Lloyds Chartering AS announced that it would establish the Lloyds Containership Pool (“LCP”) the first independent and open pool for containerships trading in the short-term period market. LCP will be targeting smaller and medium sized owners of containerships in the 1,000 to 3,000 TEU segment. LCP’s goal is to become a leading tonnage suppler to liner operators by offering market terms with a higher degree of flexibility. As a result of the pool structure, LCP can offer an alternative vessel in the same geographic region should an operator wish to upgrade or downgrade capacity of a current ship on charter.
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Aker Bonds
Norway continues to be the go to source for capital, particularly high yield bonds, for small energy companies. Highly leveraged already, the companies use the bonds, mostly short-term, to provide an equity bridge and a source of cash to meet an immediate cash need.
Last week, Aker Drilling ASA successfully completed a NOK 1.5 billion three year unsecured bond issue, which was guaranteed by its parent, Aker ASA. The bonds pay interest on a floating rate of NIBOR + 400 bps. Proceeds will be used to refinance NOK 800 million of an existing convertible bond maturing in October 2010 and for general corporate purposes. Details of the transaction are shown in the Guts of the Deal below.
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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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