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DVB Earns an A+
After playing grim reaper last week by downgrading 29 European banks, Standard & Poor’s raised DVB’s credit rating one notch from A to A+, with a stable outlook. This is one notch below that of parent bank DZ Bank AG. The bank has reason to be proud.
KAMCO – A White Knight for Korean Shipping
There are many intrinsic reasons for governments in Asia to formulate policies to support their domestic shipbuilding industry, either through direct loans to the yards or their clients. The shipping sector, however, has in sharp contrast, failed to benefit in the same way, with the exception of South Korea. As a resource-poor country, South Korea recognizes shipping as strategically vital to the nation’s economic wellbeing. During the Asian financial crisis in the late 1990s, cash strapped Korean shipping companies sold 112 ships at distressed prices to foreign buyers and as a result, the country had to grapple with the repercussions from the loss of its national fleet. This painful lesson has strengthened the nation’s determination not to allow history to repeat itself, at a time when shipowners are once again facing huge challenges on multiple fronts including a weaker demand due to the current acroeconomic uncertainly, capacity glut across all vessel types and rising bunker costs.
Armed with the mission to assist in the restructuring or liquidation of distressed assets, Korea Asset Management Corporation (“KAMCO”) has been playing a vital role in alleviating domestic shipping companies from a liquidity crisis. In 2009, the state-run financial restructuring agency established a maritime fund, designed to help shipping companies reduce their capital costs on their vessels. Since then, KAMCO has acquired 27 vessels of over USD 720 million directly from the shipping companies. This strong (and unprecedented) support for the shipping sector has allowed South Korean shipping companies to weather the after-effects of the Lehman crisis. Continue Reading
Lots of Moving Parts Managed Nicely – Polarcus Re-capitalization
As the industry has moved away, voluntarily or not, from the simplicity of bank lending, as its primary funding source, borrowers, with the assistance of their advisors, have become far more sophisticated and used the liability side of the balance sheet as a palette for the many possibilities in financing structures. The multi-tiered capital structures that result may be warranted in an effort to achieve the lowest cost of capital possible or simply a necessity to access capital wherever one can find it. Nevertheless, whatever the motivation, these structures add a level of complexity given the number of stakeholders with their own unique incentives, thereby creating risk should Murphy’s Law apply.
Polarcus Limited, a pure play marine geophysical company, is a case in point. In recent presentations the company has included the following slides, which highlight its capital structure and the impact of the recently undertaken recapitalization of its balance sheet including a refinancing of its bank debt, an amendment to its 2nd lien bond issue and a private placement of equity.
Equity Sales Continue – Navios Maritime Partners and Safe Bulkers Follow-on
While the Golar LNG Partners IPO was a surprise, the prevalence of follow-on offering is not. Last week, Teekay LNG and Navios Maritime Partners LP (“Navios Partners”) successfully concluded their offerings and they were joined this week by Safe Bulkers Inc. While there is nothing that indicates that the window is closing, there nonetheless seems to be a rush to offer.
Ultrapetrol’s Stealth Convertible
Just before the Christmas break, Ultrapetrol (Bahamas) Limited announced the offering of $60 million of its 5-year convertible senior notes, with a green shoe of $10 million. The private placement priced the next day at a coupon of 7.25% and, due to investor interest, was upsized to $70 million. With the over-allotment option exercised, total gross proceeds equaled $80 million. The initial conversion rate will be 133.1691 shares of common stock per $1,000 principal amount of notes, which is equivalent to a conversion price of $7.51 per share, representing a 22.5% conversion premium over the closing pricing just prior to the announcement. Proceeds will be used to expand its PSV operations in Brazil, support the development of its river container trade, accelerate the construction of additional river barges in its Argentine shipyard and for general corporate purposes. For more details, see the Guts of the Deal below.
Continue Reading
DVB Group Merchant Bank (Asia) Finances Brazilian Shipbuilder
In September, a syndicate of international banks led by DVB Group Merchant Bank (Asia) provided a USD 420 million export credit supported loan facility to OSX 1 Leasing B.V., a subsidiary of start-up Brazilian shipbuilder OSX Brasil S.A. The loan facility had a tenure of 8.5 years, priced at a rate of LIBOR + 4.25% p.a. and will be used to finance the acquisition and conversion of OSX’s first floating production storage and offloading unit (FPSO) referred to as the “OSX 1 FPSO” currently under conversion at Keppel Shipyard, Singapore. The unit will be operated by OGX Petróleo e Gás LTDA, a subsidiary of OGX Petróleo e Gás Participaçoes S.A. in the Waimea prospect in BM-C-41 in the Santos Basin offshore Brazil.
Norton Rose (Asia) LLP advised the lenders. Allen & Overy advised OSX and Cameron McKenna acted for OGX.
DVB’s Schiffspfandbrief
On Monday, DVB announced that its first ship covered bond issue or Schiffspfandbrief was successfully placed last week by joint lead managers, DZ Bank and Deutsche Bank. The bank issued EUR 250 million of three year 2.25% bonds, which were sold at 99.702%, equivalent to a spread of 50 bps over mid-swaps. The bond is collateralized by a pool of 56 eligible shipping loans, secured by first mortgages, of approximately $1.01 billion in principal amount representing a cross-section of DVB’s shipping portfolio. The cover pool consisted mainly of product tankers (21%), bulk carriers (18%), crude tankers (18%) and containerships (15%). The bonds were rated Aa3 by Moody’s. Purchasers, solely banks, placed 56 individual orders, with 90% placed in Germany and the balance in Austria and Luxembourg. By choosing this refinancing vehicle DVB has expanded its investor base and funding sources, which these days is a good thing.
Yes, There Was Equity Too
China’s inflation and Ireland’s banking crisis triggered this week’s market volatility. Nevertheless, Scorpio Tankers Inc. and Navios Maritime Acquisition Corporation (“NMA”) moved ahead with equity follow-on offerings. Scorpio’s registration was for a one-off transaction, whereas Navios’ was a supplement to its recently filed broad shelf registration.
DVB Hosts NYC Event
Two years ago, just after the collapse of Lehman Brothers, was the last time DVB brought together their US clients. That was a sober room and except for DVB, which at the time was meeting all its goals, there was a certain anxiety in the air. At the time DVB urged its friends and clients to be sure they remained cautiously leveraged. This time in the stunning ballroom of New York’s Mandarin Oriental Hotel the words of wisdom were to be smart, to recognize that volatility is still with us and to not make dumb mistakes. This again came from a team of bankers who continue to perform themselves thanks to their clients, as they are quick to say.
But between the wise cautionary words two years ago and their own continuing success in a business they know better maybe than anyone, it would be wise to heed their counsel. Considering the thoughtful and successful crowd in attendance, we suspect it will be.
SC to BOX – Seacube’s 2nd Attempt
Back in April, we wrote the following:
“Stripping off the baggage of its container ships and chassis, both unattractive businesses today, Seacastle Inc. has offered the public the opportunity to invest this time in its container leasing subsidiary through an initial public offering of that business, which they have named SeaCube Container Leasing Ltd. This is another example of a part that might be worth more than a whole as management recognized the recent outperformance of the publicly traded container leasing companies, Textainer and TAL International due to operating leverage. Trade has begun to resume which equates to more boxes coming on line, higher utilization and hence more revenue, with little incremental cost. In addition, given the financial constraints of the liner companies due to a very difficult 2009, it is likely that the lines will increase the portion of leased rather than owned containers in their fleet. From that standpoint, timing could not be better.”
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