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Transocean goes All-In Raising $1.08 billion in Equity and $2.5 billion in Debt
During the last days of November, Transocean Ltd re-jiggered its balance sheet through an equity follow-on offering and the issuance of serial bonds. First up was the follow-on offering for 26 million shares with a green shoe of a further 3.9 million shares. The offering was priced, through an accelerated bookbuilding process, at $40.50/share (based upon an exchange rate of CHF 0.9215/USD), a discount of 11.8% from the prior day’s closing price when the offering was announced. Proceeds of the share offering will be used to partially re-finance the company’s acquisition of Aker Drilling ASA, which was originally financed from cash and assumption of Aker’s outstanding debt. The replenished cash will be applied to the expected repurchase of approximately $1.7 billion of its 1.5% Series B Convertible Senior Notes due 2037 that holders may require it to re-purchase in December 2011. Barclays Capital and Credit Suisse acted as joint book-running managers of the offering.
Financing Newbuild Program #5 – Hornbeck Taps Equity Markets
On November 7th, Hornbeck Offshore Services Inc. announced its plans to build 16 U.S. flagged 300 class DP2 new generation offshore supply vessels, with options to build a further 16 for its upstream business. Exclusive of construction period interest, the aggregate cost of the first 16 vessels is estimated to be $720 million with deliveries scheduled during 2013 and 2014, which coincides with the delivery of approximately 145 incremental floaters and high specification jack-up rigs. The order was split equally between VT Halter Marine and Eastern Shipbuilding Group. This newbuilding program is the company’s eighth since its inception in 1997 and the fifth involving state of the art technologically advanced new generation OSVs.
Constructed with the increased demands of its deepwater and ultra-deepwater customers in mind, the new design offers double the deadweight capacity and more than doubles the liquid mud capacity of its predecessor 240 class, while maintaining an overall size that maximizes the efficiency from an operating cost perspective. While the vessels will be built in the U.S. which qualifies them for the coastwise trade in the Gulf of Mexico (“GoM”) under the Jones Act, the vessels will be deployed in the company’s core geographic markets of the GoM, Brazil and Mexico.
Teekay LNG Taps Equity Market
In the first shipping follow-on since last July, Teekay LNG Partners L.P., utilizing its $750 million shelf registration, announced, priced and successfully sold 5.5 million shares yesterday in an overnight offering raising $183.7 million. The offering, which went primarily into retail hands, was priced at $33.40/share, a discount of 3.47% from yesterday’s closing price of $34.60. According to data compiled by Jefferies, the price discount was tighter than the year to date average of 7.5% and last month’s 5% suggesting strong demand. Sales proceeds will be used to pre-fund the company’s portion of the equity purchase price of the Maersk LNG acquisition, or $146 million, with the remaining funds used for the repayment of outstanding debt under one of its credit facilities, maturing in August 2018, which bears interest at LIBOR + 0.55%. In addition to a green shoe of 825 thousand shares, the offering is not contingent on the closing of the Maersk transaction nor is the Maersk transaction contingent on the closing of this offering. More details are provided in our Guts of the Deal below.
Hanjin Shipping Completes USD 150 million Convertible Issue
Last Wednesday, South Korean carrier Hanjin Shipping raised USD 150 million from the sale of five year convertible bonds. The bonds were launched with a base issue size of USD 150 million, with a USD 50 million upsize option that can be exercised within the first 30 trading days. Sole bookrunner J.P. Morgan did not exercise the upsize option immediately, even though the book was said to be comfortably covered by demand particularly from Europe.
The coupon and conversion premium were also fixed at attractive levels for the investors, at 4% coupon and a 20% premium, suggesting the investor sentiment remains price sensitive. The convertibles were initially marketed with a coupon and yield ranging from 3.5% to 4% and a conversion premium between 20% and 25% premium over the closing price of its shares on July 6. Continue Reading
Even Big Boys Get the Blues – A.P Moller-Maersk Bides Time
Market reports suggest that A.P Moller Maersk has postponed a planned EUR 1 billion bond issue due to poor market conditions. Led by Barclays, ING, J.P. Morgan, Mitsubishi and Nordea, the roadshow for the 10-year bond was to have begun on May 31 but never transpired. Analysts attribute the delay to a poor corporate bond market which is struggling with the Greek debt crisis among other issues. Following its desire to diversify its funding sources, Maersk has been a recent and regular visitor to the bond market beginning with its debut in 2009, a 750 million Euro issue. This was quickly followed by a NOK 4 billion issue and last November by a 500 million Euro 7-year issue. No worries here as the markets will certainly right themselves and in the meanwhile we are certain Maersk has sufficient liquidity to meet its needs.
K-Sea Financing in Place – Kirby Taps Banks
On the last day of May, Kirby Corporation entered into a $540 million five-year unsecured floating rate term loan facility led by Wells Fargo, BofA Merrill Lynch and J.P. Morgan. Lenders include BTMU, Branch Banking & Trust Company, Compass Bank, RBS, U.S. Bank, Amegy Bank, Bank of Texas, Comerica, Keybank, Mizuho, Northern Trust and Royal Bank of Canada. Proceeds of the loan will be to provide financing for Kirby’s acquisition of K-Sea Transportation Partners L.P., with the amount drawn dependent on the final breakdown of the merger consideration between stock and cash.
OGX Discovers the Difference between Success and Failure – 100 bps
Last week, OGX Petroleo e Gas (“OGX”), a company controlled by Eike Batista, successfully issued $2.563 billion of 7-year senior unsecured notes in a 144A private placement. Due to strong investor interest, the deal was upsized from the original amount of $2 billion and priced at par to yield 8.5%. The spread was 611 bps over like term Treasuries reflecting Moody’s B1 credit rating. Proceeds will be used to fund the company’s expected production and development campaign and for general corporate purposes. When the net proceeds are added to cash on hand, there will be sufficient liquidity to cover these expenses until the company can self-fund through its own cash flow. While unsecured the transaction is, in fact, underpinned by potential resources of 10.8 bbls of oil, according to petroleum engineers, DeGoyler and McNaughton. The structure of the transaction is shown below.
Navios Prices New Issue
With Moody’s maintaining its B2 rating on these add-on senior secured notes, Navios Maritime Acquisition Corporation last week priced this latest issue, totaling $105 million, of its 8 5/8% first priority ship mortgage notes due in 2017. Trading earlier in the week at 104% to yield approximately 7.3%, the notes were priced at 102.25% to yield approximately 8.44% in line with price talk at 102%. Proceeds of the notes will be used to finance the acquisition of the VLCC due in June.
BofA Merrill Lynch and J.P. Morgan who led the original offering also receive credit for this one.
Equity Sales Continue – Navios Maritime Partners and Safe Bulkers Follow-on
While the Golar LNG Partners IPO was a surprise, the prevalence of follow-on offering is not. Last week, Teekay LNG and Navios Maritime Partners LP (“Navios Partners”) successfully concluded their offerings and they were joined this week by Safe Bulkers Inc. While there is nothing that indicates that the window is closing, there nonetheless seems to be a rush to offer.
Teekay LNG Partners Invests In the Angola LNG Project
To facilitate the acquisition of Teekay’s interest in the Angola LNG Project, Teekay LNG Partners L.P. agreed to issue 3.7 million common units at a price of $38.88 per share, a discount of 4% from the closing price just prior to the announcement. Proceeds will be used to fund the equity purchase price of Teekay Corporation’s 33% interest in the Angola LNG Project as payment becomes due while using interim and remaining funds for the repayment of outstanding debt under one of its credit facilities, which matures in August 2018. Net of assumed debt, the total equity purchase price is approximately $73 million subject to adjustment based on actual costs incurred at the time of delivery. The company will acquire the ownership interests and pay a proportionate share of the purchase price as each vessel is delivered which is anticipated to be during the fall of 2011 and in the first quarter of 2012.
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