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Battling on All Fronts
We don’t envy Geoff Jones, the CFO of Trico Marine Services (“TMS”), and the rest of the team at Trico, who have been very busy of late. In just the last two weeks, they have worked to bring order to their balance sheet by reducing debt and increasing liquidity. The first step in the process was the sale of two North Sea supply vessels in line with the company’s strategy to reduce both spot OSV exposure and its dependence on the supply vessel market. The proceeds of approximately $40 million will be used to repay outstanding European bank debt.
The company also reached an agreement with the shipyard in India that was constructing the seven remaining subsea service vessels. The first three will be delivered as scheduled between December 2009 and July 2010. Trico received price concessions on these three vessels, which will require only an additional $40 million to complete. Delivery of the last four subsea service veesels has been suspended with the company retaining the right to cancel its obligation to take delivery of these vessels. By preserving the option to construct these vessels, the company retains the flexibility to develop its strategic growth plans for subsea services in accordance with market conditions and liquidity requirements at a future date. The net effect of this suspension is to reduce committed capital expenditures for 2010 and 2011 by $80 million.
Hard Numbers
Moving from the theoretical to the concrete, the following examples illustrate the real cost of today’s crises:
Genco Bites the Bullet
On Tuesday, Genco Shipping & Trading (“Genco”) made the correct but painful decision to cancel the previously announced acquisition of six dry bulk newbuildings, including three Capesize and three handysize vessels, from Lambert Navigation et.al., at an aggregate purchase price of $530 million. As part of the agreement, the sellers will retain the deposits totaling $53 million. The three Capesize vessels and three Handysize vessels are being constructed in the Daehan and Jinse shipyards in South Korea, with deliveries commencing in the 4th quarter 2008 (two Handysize) through 2009.
Credit Crisis?
Based upon the data provided below, albeit incomplete, it does not appear that the credit crisis has impacted shipping loan volumes in Germany. Granted data from key players, such as HSH Nordbank, HVB and Deutsche Shipping, is missing, the numbers show that the balance of the banks have nearly equaled or exceeded last year’s total volumes in the first half of the year.
Hapag-Lloyd Ponders Its Future
As questions about Hapag-Lloyd’s future continue to circulate, we thought it worth a refreshed look at how the deal came about and where it might be going. Hapag-Lloyd parent TUI’s interests have long been split between its core tourism business and a fairly substantial container shipping business, representing EUR 449 million and EUR 197 million respectively in 2007 underlying EBITDA. TUI bolstered the shipping side of its business with the $2.3 billion acquisition of CP Ships in late 2005 that was also the catalyst for a $1.8 billion bank refinancing, handled by HVB, Deutsche Bank and Citi, and a EUR $1.75 billion bond issue handled by HVB, HSH, Citi and RBS.
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Energy Infrastructure Shareholders to Opine on Vanship
Following quickly on the heels of Seanergy’s proposed special meeting to vote on its acquisition, Energy Infrastructure Acquisition Corp. (“EII”), another blank check company, set July 17 for its special shareholder meeting. As was done last week in the case of Seanergy, we will take a close look at what the shareholders are being asked to approve.
In July 2006, EII consummated its initial public offering of 20.25 million units, each unit consisting of one share of common stock and one warrant, raising $209.25 million in net proceeds (including a portion of the green shoe). Prior to the offering, George Sagredos, the President and COO, purchased through Energy Corporation 825,398 units at the offering price resulting in gross proceeds of approximately $8.25 million.
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GOing Private
Some things were never meant to be. So seems to be the case with Global Oceanic Carriers’ short but somewhat turbulent public life. The company went public on the London AIM in a deal sponsored by Vassilis Vintiadis of Niva Shipping in the spring of 2005. At the time it was a market leader in terms of financial innovation, the first shipping company in recent memory to go public in London at all, and on an alternative market at that. If you’ll remember spring 2005 was the heat of the shipping IPO fervor in the United States, but GO Carriers’ tiny GBP 22.47 million Collins Stewart-led offering and barely larger GBP 26.5 million market capitalization at the time of its listing wouldn’t have quite cut it in New York. Nor would its fleet of three panamax and one handymax bulk carriers that had an average age of nearly 20 years.
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Safe Bulkers Files for IPO
It’s been awhile since we have seen a Greek dry bulk company file for an IPO in the United States. To us the IPO filing by Safe Bulkers is a comment not only on the robust state of the dry bulk market, but also the perception that the US equity markets are returning to life as a meaningful source of capital for global business.
Very briefly, Safe Bulkers is a dry bulk shipping company owned by Vorini Holdings, which in turn is controlled by Polys and Nicolaos Hajioannou. The company currently owns a fleet of 11 Japanese-built bulk carriers with an aggregate carrying capacity of 887,900 dwt and average age of 2.6 years. The fleet comprises panamax, kamsarmax and post-panamax class vessels. Safe Bulkers has also contracted for eight newbuildings to be delivered between 2008 and 2010, which include four post-panamax vessels, two capesize vessels and two kamsarmax vessels. The vessels are operated on a mix of spot and time charters. Management services will be provided by related party Safety Management.
Merrill Lynch and Credit Suisse are working as bookrunners on the offering, while Jefferies, Dahlman Rose, DnB NOR and Poten Capital will join as underwriters. Safe Bulkers is looking to raise as much as $253 million through the sale of 10,000,000 shares with a 1,500,000 share over-allotment option at a price of $20-$22 per share. The 10,000,000 shares represent a stake of approximately 20% in the company and all proceeds will go to the selling shareholder, Vorini Holdings. Potential IPO buyers are being enticed with a dividend yield of 9-10%.
Safe Bulkers has a wide range of credit facilities in place, but most recently between January and April of 2008, the company took out loans from DnB NOR, HVB and RBS totaling $120 million. All were swapped to fix rates that range from 2.73% to 3.95%.
Surveying the Credit Markets
Marine Money has concluded the collection of data for its 2008 shipping banker survey and would like to sincerely thank all who have participated. We are currently concluding work on our annual shipping portfolio league table and would like to thank the following banks for their cooperation and contribution to the development of a transparent and well-informed ship finance industry: Bank of Ireland, Bank of Scotland, Bremer Landesbank, Calyon, Commerzbank, Danish Ship Finance, Danske Bank, Deutsche Bank, Deutsche Schiffsbank, DnB NOR, Dresdner Bank, DVB, Helaba, HSH Nordbank, HVB, JP Morgan, KfW, Lloyds TSB, Natixis, Nordea and RBS. If you don’t see your bank’s name on the list, think it belongs there, and haven’t been in touch with us this weekend, please send an email to nhuvane@marinemoney.com ASAP to ensure you are included. Both survey and portfolio data will be released in the upcoming May issue of Marine Money.
The Week in Review
The money, apparently, is in oil as two of the industry’s biggest gurus, John Fredriksen and George Economou, both make aggressive plays into the rig space. Mr. Fredriksen, of course, has long been making investments into various facets of the offshore industry and has either spawned or acquired a bevy of offshore companies to that end. It was hardly earth shattering this week when Seadrill announced that it had acquired 200,000 shares and entered into forwards to acquire 16,300,000 shares in US-listed Pride International, an offshore company with a market capitalization of $7.2 billion. The shares amount to a 9.9% stake, worth around $708 million. The move prompted Pride International to take action to lower the threshold level of ownership to trigger its stockholder rights plan from 15% to 10%. Seadrill has also asked Pride for a meeting to discuss “potential strategic benefits for both parties of a transaction between the two companies.” A merger could be on the cards – or it could not be. Mr. Fredriksen has shown himself as skillful an investor as an acquirer, using each strategy as it suits him.
“Fantastisch”
Thankfully we knew the 7th Annual German Ship Finance Forum was going to be busier than the empty Emirates flight that brought us here. In our effort to save our favorite direct flight, which is being cancelled next month, we were thinking of lending Emirates Mike McCleery, based upon his tireless and successful efforts, to do their sales promotion. Unfortunately our principals demanded he remain focused on his job.
But we could not imagine how big is big and how supportive of our efforts the German shipping community would be. We had an inkling on Monday as we drove to our first meeting. Mike’s Blackberry did not stop buzzing as registration after registration poured in. The final count is not in but we think we are approaching 500 delegates.
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