J.F. Lehman Sells Ship Repair Unit for $325 Million

Great instances of opportunity exist, its just locating them. Even in the sleepy backwater maritime industry in the US.

J.F. Lehman & Company completed the sale this week of Atlantic Marine Holding Company to a subsidiary of BAE Systems, Inc. for an estimated $325 million. J.P. Morgan provided M&A advisory services for Lehman and Blank Rome the legal advice.

That’s the news this week….here is what we said about Lehman’s original acquisition of the yard – at a price of $190 million in the fall of 2006.
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Volatility and Uncertainty? Where?

Any concerns the market or we had with respect to volatility and uncertainty in the markets were put to rest last Thursday when General Maritime priced its follow-on offering.  While being an established company was key, we also noted the positive trend in the share price as both the vessel acquisition and follow-on offering were announced. The result was in our estimation remarkable. Described as a blowout, the deal was over 2 times oversubscribed with all the shares purchased by institutional buyers Due to demand, the deal was upsized by 20% and yet no one received their full allocation.  Moreover, from a pricing perspective, the shares were discounted by the typical 4.5% from the day’s closing price. While the transaction was accretive and positive in the long run, the results were a strong vote of confidence in Peter G. and his entire team.

Like the earlier high yield offering, it had to be done and the whole world knew it (the downside of transparency), not a favorable position for any seller. Yet Genmar’s team of bankers together with management clearly overcame that problem raising net proceeds of $195.6 million (exclusive of the green shoe), which when combined with the proceeds of the credit facility provided available financing totaling $567.6 million and therefore a funding gap of $52.4 million based upon the agreed purchase price of $620 million. However given the demand for the shares it is a near certainty that the green shoe will be exercised generating further gross proceeds of ~$31million making the gap easily manageable.
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No Pressure Just a Must Deal

General Maritime pulled out all the stops retaining a litany of Wall Street’s bankers to assist in the sale of its common stock needed to complete the financing of five VLCCS and two newbuilding Suezmax tankers from Metrostar. Debt financing is in the process of being arranged, with Nordea and DnB NOR, in the amount of $372 million, representing 60% of the purchase price. The facility is conditioned upon a successful equity offering to make up the remaining balance of $248 million plus any working capital needed. In this period of volatility in the markets, this is no simple deal. Adding further complications was S&P’s recent downgrade of the company’s debt to a B rating. This rating however needs to be put in the context of S&P’s overall view of shipping, which considers Teekay and OSG as BB and BB- rated respectively a few notches above Genmar’s.
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Another Dropdown Coming?

Last Thursday as we reported Navios Maritime Partners announced the follow-on offering of a further 4.5 million common units with a green shoe of 675 thousand units. On the following day the transaction was priced at $17.84 per unit a 5.26% discount from Thursday’s closing price of $18.83. Proceeds from the offering will be used to fund its fleet expansion and for general partnership purposes. Greater detail is shown in our Guts of the Deal below.
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With 2 Months to Spare

Today, Navios Maritime Acquisition Corporation, the SPAC formed by Navios Maritime Holdings (“Navios”) back in June 2008, announced that it had agreed to acquire a 13 vessel fleet, consisting of 11 product tankers (4 LR1s and 7 MR2s) and 2 chemical tankers for an aggregate purchase price of $457.7 million. The company also has options to purchase two additional LR1s for $40.5 million each. The purchase price will be paid from cash ($123.4 million) and $343 million of bank financing consisting of a three term loans aggregating $277 million and a $57 million revolving credit facility. The high leverage also leaves excess cash remaining for growth from the original $220 million raised. The company’s rationale for the purchase is its belief that the assets are being acquired near their inflation adjusted historic low prices and the anticipated increased demand for products as the global recession eases.
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Insatiable!

Investors cannot seem to be able to get enough of the shares and bonds of Teekay and its subsidiaries. In the latest iteration, Teekay Tankers announced Monday, after market close, its intention to offer 7 million shares of Class “A” common stock of the company in a public offering. But even before the market opened the next day, the company announced that the offering had been increased to 7.7 million shares, following the trend of Teekay’s previous offerings.

With the joint bookrunners, UBS, Citi, J.P. Morgan and Deutsche Bank opening up their retail systems, the bulk (75% to 80%) was covered by retail with the balance covered by institutions. In a world of low interest rates, a consistent dividend payer is a star.
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Seacastle Redux Or Fortress’ 2nd Attempt to Exit

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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Priced to Sell

Last Wednesday, Berlian Laju Tanker sold USD 100 million five year convertible bonds with joint bookrunners J.P. Morgan and RS Platou Markets. The bonds were priced to sell with an attractive coupon fixed at 12% and come with a conversion premium of just 10% and a one time reset after six months. The modest conversion premium could well suggest that BLT and its advisors are looking for a more equity like transaction, which will help improve its leverage risk profile in the medium term, should the bonds be converted into shares.

The proceeds from the offering will be used for, among other things, investments in the expanding cabotage trade in Indonesia, based upon its long-standing relationship with Pertamina and other oil and gas operators in Indonesia. The proceeds may also be used to repay or redeem existing debt, including outstanding convertible bonds guaranteed by the company, and for general working capital. BLT needs fresh capital to cover a potential put on its outstanding USD 125 million convertible bonds in May 2010. As we understand from RS Platou Markets, these proceeds are not expected to be used for the on-going acquisition of Eitzen Group. Continue Reading

More BLT

On Wednesday, Berlian Laju Tankers announced that it had successfully priced and privately placed a $100 million 12% guaranteed convertible bond issue due 2015. Based upon very strong investor demand, the underwriters utilized the $25 million upsize option. The capital was sourced worldwide: 32% Hong Kong, 22% U.S., 12% Indonesia, 12% UK, 11% Norway and 11% Singapore and other.

The terms including the coupon and conversion feature are very attractive to investors. The initial conversion price for the bonds is IDR 737 (with a fixed IDR/USD exchange rate of IDR 9,362/$1) and the conversion premium is 10% above the closing price of IDR 670 on February 2nd on the Indonesia Stock Exchange. There is a cap in the form of a call option which allows BLT to call the bonds after 3 years provided the share price is at least 130% of the strike price.
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Blowout!

As a seasoned issuer, Teekay Corporation wasted no in pricing what was expected to be $300 million of senior unsecured notes due in 2020. On Friday, not only did they announce highly competitive pricing, but also that the offering had been upsized by 50% to $450 million.

With a coupon of 8.5%, the deal was priced at 99.181% to yield 8.625% or 492 bps over like term Treasuries. Details of the transaction are shown in the Guts of the Deal below.

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