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Too Early to Tell
A quarter does not make a year, but it’s off to a good start. Dealogic’s latest league tables arrived last week in the new format implemented in Q4 2010, which provides totals for syndicated marine finance loans and then breaks them down into their constituents, shipping and offshore service loans. This is in line with the Norwegian lending focus, disadvantaging pure shipping banks, although these we would guess are few and far between these days, as diversification is a key risk management tool. Data, for this period, is broken down and provided for all three categories, whereas for the last quarter only offshore was broken out. We have come around to this way of thinking and will focus mainly on the totals rather than the individual sectors, although we will mine the latter for interesting data when it appears.
Golar Partners Prices While Parent fills Warehouse?
Was it a vote for shipping, for the MLP structure, or Mr. Fredriksen? At the end of the day, it does not matter as the first shipping IPO of 2011 met with strong demand and priced above its range. Last week, Golar LNG Partners LP (“GMLP”) priced its initial public offering of 12 million shares at $22.50, above the stated range of $20 to $22 per share. Total gross proceed were $270 million, which could increase to $310.5 million if the green shoe is exercised in full. The limited partners own a 30.1% interest in the company with Golar LNG Limited owning the 2% GP interest as well as a 67.9% limited partner interest. The final details of the transaction are shown in the Guts of the Deal below.
Cool, Steady Heads Prevail – Genmar Restructures Liabilities
Banking on its relationship with its long-time investor, Oaktree Capital, General Maritime Corporation successfully raised $200 million in new capital, which formed the cornerstone of a restructuring of its balance sheet designed to improve liquidity largely through the reduction of its near-term debt obligations. The important side effect of the transaction was a reduction of the cash flow breakeven rate to a level commensurate with today’s weak tanker market.
Peter G was here before in the late 1990s, another weak market, but this time it was much tougher due to the large commitments resulting from the acquisition of the Metrostar fleet. As one can see from the result, this was without a doubt one difficult negotiation and we can only imagine, given Peter G’s penchant for cigars, long hours in a dark smoke-filled room. But, of course, we would have to imagine it since City ordinances prohibit smoking and Peter G gave up cigars quite a while ago. But why let facts get in the way of a good image.
Skis On; Productivity Down – Conversations Between Nordic Events
Not us for sure, but now we understand the sudden decline in transaction since the rush at the beginning of the year. Norwegians have been playing hooky and sneaking out of work this week to watch the action in Oslo at the Holmenkollen where the 2011 FIS Nordic World Ski Championships are taking place. For the Scandinavians this is the equivalent of the World Series. While we did not have a chance to attend an event, we suspect that if the shipping markets continue at these levels there will be a number of shipowners strapping on skis and lining up at the ski jump.
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.
A Rude Wake-up Call
Market hearsays turned into wide-spread panic as news of Korea Line’s bankruptcy filing hit the industry on Tuesday. The South Korea’s second largest bulk carrying line filed for a court receivership after its failure to renegotiate a number of loss-making charter arrangements concluded prior to the financial crisis. Alarm bells were also ringing as far away in the United States where several public listed companies have their ships chartered to the beleaguered company.
Among them, probably the most exposed was New York listed Eagle Bulk Shipping. The company has 13 out of its 48 ships on time charter to Korea Line, lasting between six to ten years. In a statement to the stock exchange, the company described its exposure to Korea Line as modest because the vast majority of the charters were fixed at close to current market rates. “To date, none of our charters with Korea Line have been restructured,” it added. In his latest report, DnB NOR’s analyst Glenn Lodden expects many of these time-charter contracts will be renegotiated and the most expensive might be breached. However, he believes that it is unlikely that Korea Line will be liquidated because the company remains “an important part of South Korean infrastructure (iron ore, coal, LNG imports).” Continue Reading
Aker Drilling’s Makeover in Three Steps
Parent company, Aker ASA, intends to recapitalize and reintroduce its subsidiary, Aker Drilling ASA, after a 3 year hiatus, to the Oslo Stock Exchange after carrying the company through the start-up phase and establishing a solid base for its future growth. In 2009, the company took delivery of two new 6th generation harsh environment UDW H6e semi-submersible drilling rigs, the Aker Spitsbergen and the Aker Barents, both of which are on long-term contracts. The Aker Spitsbergen is on contract with Statoil through July 2013, with the operator having 5×2 year options. The contract has a remaining value of $480 million over the remaining fixed term. Fixed by Det norske Oljeselskap (“DNO”), the Aker Barents is on contract through July 2014 with DNO having 1×2 year option. The remaining firm value of that contract is $730 million. With both rigs in operation, revenue of $1 million per day is generated with daily EBITDA of $600 thousand.
Equity without Dilution – Seaspan’s Mantra
Last week, we reported on the launching of Seaspan Corporation’s preferred stock issue, which priced last Friday. The company sold 10 million shares of its 9.50% Series C Cumulative Redeemable Perpetual Preferred Shares, par value $0.01 per share, liquidation preference $25.00 per share. Net proceeds to the issuer were $241,250,000. Details of the transaction are shown below in the Guts of the Deal.
Preferred Shares from Seaspan
On Wednesday, Seaspan Corporation, utilizing its $1billion shelf registration, filed a preliminary prospectus supplement for a public offering of its Series C Cumulative Redeemable Perpetual Preferred Stock (“Preferred Shares”). The number of shares being offered was not disclosed; however, the liquidation preference is $25 per share. Proceeds will be used for general corporate purposes, which may include vessel acquisitions or investments. Pending the application of funds for these purposes, the company may prepay a portion of its outstanding debt under certain of its revolvers. Following the offering, Seaspan intends to file an application to list the shares on the New York Stock Exchange.
A Large Weight Lifted – Genmar Sale-leaseback
What began last quarter as an attempt by General Maritime (“Genmar”) to sell a VLCC to meet the terms of its $22.8 million bridge loan from DnB NOR and Nordea, ended this week with a sale of three unencumbered MR product tankers from the former Arlington fleet to affiliates of Northern Shipping Funds (“NSF”) with a concurrent charter-back. NSF is a leading alternative capital provider focusing on equity investments in the shipping and offshore oil service sectors.
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