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Dahlman Rose & Co Add Powerhouse Chairman
Well know financier Kim Fennebresque has joined Dahlman Rose as the firm’s Chairman. The move continues the investment bank’s enormously successful development built on commitment to client service, top shelf independent research and superior personnel recruitment over the past half dozen years. In fact the current move should accelerate the firm’s growth and strengthen it’s already considerable platform.
Mr. Fennebresque joins Dahlman Rose after a distinguished career, which started at The First Boston Corporation in 1977. His career path since then could be used as a business school model for just how to gain valuable experience, contacts and skills needed to lead a successful investment bank. Mr. Fennebresque left First Boston in 1991 to join Lazard Freres as a General partner where he remained until joining UBS to lead that bank’s Mergers & Acquisitions and Corporate Finance departments.
Then in 1998 he joined SG Cowen, the US subsidiary of Societe Generale. He served as President, CEO and Chairman for most of his tenure at Cowen. It was that sort of reputation which led the US Treasury to ask him to join the Board of GMAC.
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Picking up Distresed Assets and Private Equity
John Kennedy has a quote: “When written in Chinese, the word “crisis” is composed of two characters-one represents danger, and the other represents opportunity.” But even as the shipping markets in general remain in doldrums, there have been surprisingly few mergers and acquisitions in the market, contrary to what one might expect. The lack of liquidity and funding from the banks could be a reason. Or could it also be that market watchers are still holding on to the view that asset prices have yet to hit rock bottom? So whether it is this fear of catching a fallen knife or the lack of financing and quality investment opportunities, seasoned shipping investors and private equity firms remain largely on the sidelines. There were few public distressed situations this year and this could well suggest that banks are working very hard with their clients to avoid foreclosures, rather than accepting haircuts on assets. Continue Reading
A Bellwether?
The bond market is getting better. As we saw with the Hornbeck bond last month, spreads and trends are improving. The economy seems to be bottoming out and with an improving economy and inflation fears increasing interest rates should follow. The timing for an offering seemed propitious then as it does now.
It was therefore no surprise that Seacor Holdings Inc. (“Seacor”) became one of the first NY-listed “shipping” companies to issue bonds this week when it priced and sold $250 million of 7.375% Senior Notes due in 2019. The issue was priced at 99.239% to yield 7.471%, reflective of the current market and at a much better rate then would have been achievable 6 months ago. This equates to 400 bps spread over like term Treasuries. The issue was well received and several times oversubscribed and despite requests to upsize the deal, Seacor was satisfied at the current level.
Tightening the Screws
Last week, Global Ship Lease (“GSL”) announced that they had come to terms with their bankers, Fortis, Citi, HSH Nordbank, DnB NOR and SMBC, with respect to an amendment of their $800 million credit facility. The amendment incorporates the following main terms:
• The LTV covenant is maintained at 75% but is waived through November 30, 2010, meaning the first test will take place on April 30, 2011. Ongoing testing is conditioned upon the availability of valuations.
• Amounts borrowed under the facility will bear interest at LIBOR plus 3.50% through November 2010 and thereafter pricing will be on a grid of 2.50% to 3.50% depending on the LTV.
• The $82 million purchase of the CGM Berlioz will be funded by a $42 million drawdown on the facility, no less than $20 million from cash on hand with the balance of no more than $20 million funded from an over advance loan (“OAP Loan”) under the facility.
• The OAP Loan has repayments scheduled for November 2009 and January 2010 based upon free cash flow in excess of $20 million. In any event, the loan must be repaid in full by June 30, 2010.
• Concurrently, with the Berlioz funding, all undrawn commitments, approximately $200 million, will be cancelled and the facility will convert to a term loan.
• CMA CGM has agreed to defer redemption of its $48 million in preferred shares until after the final maturity of the credit facility in August 2016. Dividends on these shares will be permitted. In addition, CMA CGM will not reduce its holdings of common shares below the current level of 24.4 million until the conclusion of the waiver period, November 2010.
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Hornbeck Seizes Opportunity
Last Thursday, Hornbeck Offshore Services (“Hornbeck”) announced that it agreed to sell $250 million aggregate principal amount of its 8% Senior Notes due 2017 in a private placement pursuant to Rule 144A. Based upon demand, the offering was upsized by $50 million from the original transaction size announced the day prior. J.P. Morgan, Wells Fargo, Jefferies and Goldman Sachs were the joint lead book runners. Capital One, Comerica, DnB NOR and Fortis were also involved.
The net proceeds of approximately $237.3 million from the sale will be used to repay debt under the company’s revolving credit facility, which amounts may be re-borrowed. The remaining net proceeds will be used for general corporate purposes, which may include the retirement of other debt.
Global Ship Lease Continues to Struggle With LTV
Global Ship Lease (“GSL”) remains in default of the loan to value covenant in its $800 million credit facility with Fortis, Citi, HSH Nordbank, SMBC, KfW, DnB Nor and Bank of Scotland. As of December 31st, there was $542.1 million outstanding under the facility.
Among the many restrictive covenants, the company has breached and sought waivers from the banks for the LTV test, which provides for a maximum leverage of 75%.
Directly impacted by the economic recession, demand for liner services and therefore containerships collapsed last year. Consequently, there has been a dramatic decline in values and de minimis sale and purchase activity. With little activity and therefore no comps, there is hesitancy on the part of brokers to value assets. Hence the value of GSL’s fleet is a question mark. If, in fact the leverage test is exceeded, the company must either provide additional collateral or prepay the loan to cure the default.
BNP Fortis Union is a Case of 2+2 = Huge Potential
Fortis won investor backing for the sale of banking units in Belgium and Luxembourg to BNP Paribas SA, overcoming seven months of shareholder opposition to the breakup of what was once Belgium’s largest financial-services firm.
For the shipping community the transaction marries two superb shipping teams. The combination offers the industry a robust product line, including strong equity and debt capital markets expertise and of course a strong bank. There is also a track record of success on both sides.
Finance for Asian Shipping
The availability of ship financing and alternative sources of capital was the central theme revolving Sea-Asia’s conference yesterday. Referring to a slide that illustrates the impact of banks writedowns on their market capitalisations (see below), Dagfinn Lunde, Member of the Board of Managing Directors of DVB Bank SE, pointed out that even though the traditional ship financing landscape has changed dramatically, there is still money available from banks. He told the crowd that DVB, DnB NOR, Nordea, Nord LB, Fortis and some Greek banks are open to different extents and it is possible to put together club deals between USD 100 million to 120 million today. “If you have the words ‘energy’ or ‘offshore’ in your project, even some US banks are still willing to lend,” he added. Continue Reading
Waivers And More Waivers
Not unsurprisingly, the difficulties in the marketplace are becoming more evident as the number of waivers of covenants increases in the public sphere. However, we understand that it is on the private, or dark side if you will, where the heavy lifting, at least in terms of restructuring, is taking place. The appropriate analogy might be the bare-knuckle storm below the calm sea of the public genteel discussions. Nevertheless, these exercises may be nothing more than band-aids should the market not improve. We certainly understand the cautious approach taken with respect to the public companies given the ramifications. The question remains as to what impact the private discussions might have on the public. We watch and wait as the parties stake out their positions.
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Largest FPSO Project Loan Ever
BTMU and Fortis, as Coordinators, announced this week the successful closing of a $585 million project loan to finance the conversion and subsequent operation offshore Brazil of the FPSO Espirito Santo. The FPSO is owned by SBM Offshore (51%) and MISC Berhad (49%) and upon delivery will enter into a 15 year charter to Shell Brazil.
Despite the challenging market conditions, a total of 11 banks (BNP Paribas, BTMU, CIC, DnB Nor, Fortis, ING, Mizuho, Rabobank, RBS, Sociiete Generale and SMBC) participated in the financing. The loan was significantly oversubscribed which all owed for final take downscaling for all syndicate members.
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