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Funding on Call – Navios Acquisition Taps DVB
Earlier this month, Navios struck again. Utilizing its financial prowess, the Navios team again accessed the bank market for the funding of two newbuilding LR1 product tankers, under construction at Sungdong Shipbuilding, with delivery in Q4 2012 and Q1 2013. The new term facility for up to $51 million, to be drawn in two advances, was provided by DVB Bank to Navios Maritime Acquisition Corporation.
FSL Gets Refinancing Done in Tough Market
Last Thursday, First Ship Lease Trust (“FSL Trust”) announced that it has Successfully entered into a loan agreement with a syndicate of eight lenders for a six year amortising term loan of USD 479.6 million, secured against its current portfolio of 25 vessels. The new term loan facility will be used to refinance all its maturing bank loans with an outstanding loan balance of USD 483.1 million (refer to Table A). The remaining loan balance of USD 3.5 million will be repaid in cash from FSL Trust’s internal funds.
The new term loan facility is provided by a syndicate of banks led by ABN Amro, Singapore Branch and Overseas-Chinese Banking Corporation (“OCBC”) as mandated lead arrangers and bookrunners. The other mandated lead arrangers are Bank of Tokyo-Mitsubishi UFJ (“BTMU”), UniCredit Bank, Singapore Branch (“UniCredit”), Sumitomo Mitsui Banking Corporation, Singapore Branch, Korea Development Bank, ITF International Transport Finance Suisse (Zurich-based wholly-owned subsidiary of DVB Bank) and KfW IPEX-Bank. Four out of five existing lenders in the maturing revolving credit facilities – BTMU, UniCredit, OCBC and SMBC took positions in the syndication. German bank Helaba is conspicuously missing in the latest line-up, but FSL Trust attracted the strong support from four new lenders (one Asian and three European) in today’s tough credit market. Continue Reading
Polarcus Taps Export Finance
Last Thursday, Dubai-based marine geophysical specialist Polarcus Limited signed a term sheet for a bank facility of USD 410 million with DnB NOR Bank, DVB Bank, and the two Norwegian export credit agencies, Garanti-instituttet for Eksportkreditt (“GIEK”) and Eksportfinans. The facility will be drawn down in 5 tranches for the refinancing of existing debt related to three seismic vessels as well as for the construction of two newbuildings at Norway’s Ulstein Verft.
Eksportfinans will be contributing USD 260 million to the facility which will be used for the long term financing of the two new vessels under construction. The interest rate will be fixed at 2.85% in addition to 2.75% guarantee commission to GIEK and the commercial banks. The facility is subject to customary covenants, including minimum liquidity reserve of USD 25 million, minimum equity ratio (25% equity to total assets), minimum working capital of USD 22 million and a lock up clause for sales of shares currently belonging to the Zickerman family. The rest of the facility will be largely used to refinance existing senior debt from its bondholders. Continue Reading
Ocean Rig’s Debt Feast – Banks and Bond Market Provide Support
It’s been a very busy and productive month for Ocean Rig UDW Inc. as it has finally fully funded its current capex program. First, the company arranged a new $800 million syndicated secured term loan facility to partially finance the construction costs of the Ocean Rig Corcovado and Ocean Rig Olympia. The facility has a five year term based upon a 12 year amortization and bears interest at LIBOR plus a margin. The facility is led by Nordea and ABN AMRO and includes in the syndicate GIEK, DVB Bank, Deutsche Bank and National Bank of Greece. A portion of the proceeds of the loan will be used to repay the $325 million bridge loan used to partially finance the Corcovado.
In addition, the company restructured its $1.1 billion secured credit facility led by Deutsche Bank which is secured by the Ocean Rig Poseidon and Ocean Rig Mykonos. The parties have agreed to reduce the maximum availability from $562 million to $495 million for each rig. Ocean Rig has also agreed to provide an unlimited recourse guarantee and will be subject to certain financial covenants. This guarantee is in addition to the existing Dryships’ guarantee. With a contract now in place, full drawdowns will be permitted for the Poseidon. For the Mykonos, the company has up to one month prior to delivery to execute an acceptable drilling contract in order to draw down on its facility.
After putting these deals to bed, the company then announced its intention to offer, through a private placement, $500 million of senior unsecured bonds in the Norwegian market. While on the roadshow, the company met some resistance from investors and had to sweeten the terms. The coupon range went from 8.25%-8.75% to 9.00%-9.50% with the call options also increasing. Year 3’s call went from 103.5% to 104.5%, while year 4’s call increased 50 bps to 102.5. The company has also undertaken to have the bonds rated by both Moodys and Standard & Poors and to list the bonds publicly on a reputable exchange.
Yesterday, DryShips announced that it had priced the $500 million of the senior secured bonds due in 2016 at 9.5%, the top end of the adjusted range. The bonds were priced at par with the proceeds to be used to fund the group’s newbuilding program and for general corporate purposes. With substantial bank debt ahead of it, these unsecured bonds had to be priced right as well as carefully structured to protect the bondholders. In addition to tight financial covenants, the company has various undertakings including a negative pledge and covenants that restrict funds flow within the group as well as dividends. More detail is provided in the Guts of the Deal attached.
Ocean Rig is a pure play ultra-deepwater driller, with a superior asset base, including two harsh environment semisubmersible drilling rigs and, by the end of the year, four premium drillships with options for four more.
In its credit analysis of the company, Nordea highlights as credit positives:
- Modern and competitive fleet of ultra-deepwater units
- Experienced deepwater driller and harsh environment operator, which has operated in 12 countries over the past nine years.
- Strong market outlook
- Modest credit profile
Credit challenges include:
- Exposure to a highly cyclical industry
- High newbuilding activity
- Limited cash flow visibility
- Significant committed capital expenditures as well as the possibility of the exercise of the options
- Risk of increased leverage.
On a preliminary basis, the company was given shadow rating of “B+” with the bonds one notch lower at “B.”
The global coordinator and lead manager was Pareto Securities and the joint lead managers were Fearnley Fonds and Nordea Markets .
An Interesting Combination
Club deals involving multiple financial institutions from the Middle East, Asia and Europe are not common, but United Arab Shipping Company (“UASC”) has demonstrated that raising capital across these regions can still be done today, if you know where to look. Last Tuesday, the container shipper announced that it had secured a USD 302 million term loan facility from a club of four financial institutions to purchase three 13,100 TEU vessels. The vessels are part of a nine-ship order in 2008 at Samsung Heavy Industries shipyard in Korea, valued at a combined total of USD 1.5 billion.
As part of its support for the country’s shipyards, the Export Import Bank of Korea (“KEXIM”) will be financing 70% of the USD 302 million term loan facility and the remaining 30% will be taken up by three mandated lead arrangers – BNP Paribas, Industrial and Commercial Bank of China (“ICBC”) and Ahli United Bank (“AUB”). BNP Paribas is also the structuring bank, the documentation bank, the agent and the account bank. Continue Reading
In Conversation with Dagfinn Lunde, DVB Bank
Marine Money talks to Mr. Dagfinn Lunde, Member of the Board of Managing Directors at DVB Bank in Singapore, and hears his views on China, the current developments in global ship finance and the bank’s lending policies. Here are some excerpts.
Marine Money: Do you think the worst is over for shipping?
Mr Lunde: I would say the worst is over. December 2009 was basically the deepest point and clearly the picture looks better today. The demand side in shipping is fine, but we are still concerned with the problem of oversupply, particularly the larger dry bulk ships. In general, most of the segments except container boxes are in oversupply. We have too much shipping capacity at the moment and the reality is that we have more than three times as much capacity in the shipbuilding industry than what is needed for vessel replacement at a normal level. That is a dramatic situation ahead of us. Continue Reading
One Step Closer – Ridgebury Obtains Loan Commitment
In it’s latest amended filing, Ridgebury Tankers disclosed that it has arranged a $100 million two-year senior secured credit facility from DVB Bank. Borrowings under the facility will bear interest at Actual Interbank Market Rate plus 3.10%. In addition, there is an upfront fee of $3 million or 3% of the facility amount. The facility will be secured by first mortgages on the vessels together with the customary security and covenants required for loans of this type.
Going Public
The expression going public does not only refer to companies. In this instance, our neighbor and good friend Oivind Lorentzen seeking greater challenges beyond those offered by his private interests in shipping has accepted the position of Chief Executive Officer of SEACOR Holdings Inc., where he will have the enviable position of working hand-in-hand with Executive Chairman Charles Fabrikant, his predecessor in that role and the founder of the company.
Top Ships and DVB Bank Agree
A preliminary agreement was reached last week between Top Ships and DVB Bank pursuant to which Top Ships will receive waivers for covenant breaches through the end of 2010 and the loan related to the acquisition of the M/T Ionian Wave and M/T Hongbo, due July 30, 2010, will be restructured.
In return for a partial payment of $7.7 million, of which $3.7 million was from cash on hand and the balance from two bridge loans from unrelated third parties, DVB agreed to the repayment of the loan in quarterly installments through June 2015 and the termination of the stock pledge of approximately 12.5 million shares.
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High Yield Report Card
We love to borrow the work of others particularly when they have insights we lack. This week “Professor” Ethan Ram of DVB Bank shared with us the presentation he made at the University of Piraeus last month on the high yield bond market. While it is in fact a primer on the market, what piqued our interest were his slides on how that market had performed.
Beginning in the 2Q 2009, high yield issuance grew significantly, as investor risk appetite returned and corporations required funding in the absence of bank debt or were in fact coerced by their lenders to issue bonds to pay down existing bank debt in order to reduce the bank’s exposure.
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