Norwegian Bonds Return

We spoke too soon last week in intimating the demise of the Norwegian bond market. With the assistance of Fearnley Fonds ASA, I.M. Skaugen this week issued  NOK 200 million of 3 year unsecured fixed rate notes with a coupon of 10.5% with the repayment obligation swapped to U.S. dollars. The proceeds will be used to finance the re-purchase an existing issue which matures in

I.M. Skaugen & Teekay LNG Partner in $90 million Lease Deal

The market moves, liquidity returns, but things have changed. Forty two percent of bankers who responded to our annual survey last month believe that a reasonable advance rate for a charterfree newbuilding is under 60%. Another 46% believe the rate should be under 70%. This leaves most owners without an attractive and high quality charter left to come up with 30-50% of newbuilding costs in equity. Taking into account how high ship values have gotten, that means even strong owners with significant newbuilding programs need to think creatively about how best to raise the equity they need if they don’t wish to resell their newbuilding contracts.

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VALUING SKAUGEN’S “LIGHTER” Side

As we are going to press, I.M Skaugen and Teekay Shipping announced their intention to create a joint venture with Skaugen’s lightering business, Skaugen Petro Trans (SPT). Although the deal is still subject to due dilly, the boards of both companies have agreed to an MOU and hope to close by October 1, 2003. As we understand it, Teekay will buy 50% of SPT for a combination of cash at closing and an earn out based on projected EBITDA. Fair enough, but the million dollar question is – how do you value a lightering business? Unlike Citibank, which finally sold Crowley Maritime’s MTL Petrolink to American Eagle Tankers after more than a year on the market for half the original $23 million asking price, we believe this case is different as it was Teekay that made the initial overature to Skaugen.

Let’s put this deal into perspective. SPT generated EBITDA of $6.1 million in 2Q03, up sharply from the $1.9 million the company did in 1Q03, but the company’s first half 2003 EBITDA of $8 million is down from the $15 million the company generated in the same period in 2002. Although Morits Skaugen declined to comment on the valuation metric used, the company did say in a recent filing that it thought 6-9x EBITDA was a reasonable range. At Skaugen’s current valuation of 7.6x EBITDA, the company is worth $140 million and Teekay’s 50% stake $70 million. Although

the companies have not yet disclosed the terms by which Teekay can acquire the remaining shares in SPT, it is hard to imagine the the buyers would be satisifed with a minority interest indefinately.

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Rankings 2003 : Marking 2002 Performance

By Urs Dür

Every year the Rankings issuecauses as much controversy as applause and, hence, every year we at Marine Money try to make it better and more inclusive. The controversy arises from different interpretations of balance sheet and income (P&L) statement line items and the relevance of each of the tests to the public companies analyzed. This marks the third year that Rankings has been based on ratio analysis tests. 2000 Rankings, published in June/July 2001, had five tests over for 41 companies, with Coflexip Stena Offshore deemed the best performer. 2001 Rankings, published in July/August 2002, had 53 companies and eight tests, with D/S Torm the winner. This year, 2002 Rankings – with the dutiful assistance of Daniel Ahmad, our intern from The Yale School of Management and many years solving the world’s problems at the United Nations – consists of 60 companies – 18 having never before appeared – tested in nine ways to yield the best overall performer of 2002: Oceaneering International (NYSE: OII).

lic, traded for the full year of 2002 and had to have, by time of ranking in May 2003, printed and available income (P&L) and balance sheet statements for 2002.

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The oslo 8: OSE Shipping Equity Values

Since Stelmar successfully completed its IPO in New York last spring a lot of the focus on the public shipping sector has moved in the same direction. Since then even more companies have raised capital in New York either through IPOs or a secondary/ADR listing. The Athens Stock Exchange is still not open to shipping companies under a set of rules shipowners are happy with, Copenhagen is as silent as ever, and the same can be said for Stockholm, London, Amsterdam, and Milan. In Asia there is only small interest with sporadic activity.

So what about Oslo? Has the “World’s Shipping Bourse” lost all its glory and is now only an underpriced, illiquid disaster waiting to happen? We think not. There are still shipping companies worth nearly $5 billion listed in Oslo and although there have been no new IPOs or significant secondary listings for years it would be wrong to disregard it completely. There is still a good mix of non- tanker shipping companies that we feel is worth a second look.

On the coming pages we have taken a sharp look at 8 companies listed in Norway. We will give you a brief description of their current valuations and give a few hints of what should or should not be done to help bring foreign institutional investors back to Oslo.

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