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Reverting to the Mean?
Last week, Dealogic published its Bookrunner and MLA Tables for Syndicated Marine Finance Loans for the first half of 2011 and while growth is clearly evident, there is a noticeable defining trend. The offshore services sector, given its strength and capital requirements, is taking on a far more meaningful role.
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.
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.
RCL refinances with DnB NOR
The Singapore subsidiary of Thailand listed Regional Container Lines has secured a USD 85 million loan agreement to satisfy its working capital requirement and refinance all its existing ship financing related indebtedness with the Norwegian lender. The loan quantum is 66% of combined market value of the collateral vessels and the tenor period is six years from drawdown with the repayment of 24 equal quarterly instalments.
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.
Partial Spin-Off to Follow-on – Diana Container Raises Equity
Back in December, Diana Shipping Inc. spun off 80% of its 55% interest in Diana Containerships Inc. by distributing to its shareholders 2,667,066 shares. The shares began to trade on NASDAQ in January of this year.
Subsequently, on May 9th, Diana Containerships filed an F-1 registration statement for a follow-on offering of common shares. The shares closed that day at $12.64 per share. On May 31st, the company filed a press release announcing a follow-on offering of 14 million shares and a concurrent $20 million private placement of common shares to Diana Shipping. The offering, which was upsized to 14.25 million shares due to investor interest, was priced on June 10th at $7.50/share, a 27% discount from the closing price the day of the public announcement. While substantial, it needs to be put in context. On May 2nd the Dow Jones Industrial Index hit a recent high of 12,807.36, which began a steady six week market decline, its longest slump since 2002. This was certainly not a propitious moment for an equity offering. In fact from the date of filing to the date of pricing the market as measured by the DJI fell 5.8%. If in fact the window for equity offerings was open it must have been barely a crack with investors clamoring for a substantial discount given the falling market and only being receptive, in this instance, because of the good name attached to the deal.
Why Wait? – OSG’s Forward Start Revolver
Last week, Overseas Shipholding Group, Inc. announced it had entered into a $900 million unsecured forward start revolving credit that matures on December 31, 2016. The company may begin to borrow under the facility on February 8, 2013, the date on which OSG’s current facility expires. With an interest rate of LIBOR + 2.75%, the new facility incorporates the same financial covenant package as the original facility as well as an “accordion feature”, which permits an increase in total availability of up to $1.25 billion through additional bank subscriptions prior to the start date. Even with the accordion feature, the availability is less than the original facility it replaces.
Regent Seven Seas 2nd Lien Notes
Last week, Seven Seas Cruises S. DE R.L., the indirect owner of Regent Seven Seas’ three luxury cruise vessels successfully issued $225 million of 9 1/8% senior secured notes due in 2019. Due to strong demand the offering, sold at par, was upsized from $200 million to $225 million and priced at the tight end of price talk. The notes were rated B- and B3 respectively by Moody’s and S&P. The issuer is owned by Prestige Cruise Holdings Inc., a holding company which also owns Oceania Cruises and is itself ultimately controlled by Apollo Management.
Meeting an Immediate Need, While Looking to the Future- Scorpio Borrows and Files Shelf
In order to partially finance the recently acquired two LR1 Product tankers of 51,000 DWT built in Korea which deliver this month, Scorpio Tankers Inc. yesterday announced that they had arranged a new credit facility with Nordea Bank, DnB NOR and ABN AMRO to finance 50% of the $70 million purchase price of the vessels. The new facility provides availability of up to $150 million for a year.
Bank Loan in Drag – NewLead Heads to Norway
As any good salesman will tell you it’s all in the packaging, particularly when you are entering new markets. Back in December, NewLead Holdings Ltd filed a form F-1 to sell in a follow-on offering $115 million of common stock here in New York. Unfortunately, the timing was off and the offer was shelved until the window re-opens. The company, however, was not dissuaded and, together with DnB NOR and S Goldman Advisors, jumped on a flight to the second largest source of capital for shipping, Oslo, with a transaction that marries the “best” of secured lending with the terms of a high yield bond. The challenge for the company and its advisors was to overcome the fact that the company is a small cap Greek company, which is not involved in oil and gas. There is no better team to speak “Norwegian” and sell the deal. DnB NOR is a key lender and major capital markets player in Oslo and knows both markets intimately. Sheldon Goldman also has broad capital markets exposure here, but perhaps more importantly, he understands the Greeks through his role as financial “consigliere” to Angeliki Frangou.
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