On Wednesday, General Maritime Corporation announced that it had amended its $550 million revolving credit facility and its $372 million senior secured credit facility, each led by Nordea and DnB NOR as well as its $200 million facility with Oaktree Capital to reduce the minimum cash covenant. Under the agreed terms, the minimum cash and cash equivalent balance and revolver availability is reduced from $50 million to $35 million through December 31, 2011, which amount steps up to $40 million through March 31, 2012. Subsequent to the latter date, the original terms apply. In the case of the Oaktree facility only a 10% cushion in Genmar’s favor applies.
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By their nature all public companies are focused on their shareholders, but General Maritime’s behavior, at times, seems compulsive. And that is a good thing. Back in 2007, the company recapitalized itself, adding debt so it could pay out a special dividend of $11.19 (adjusted) per share, when there were no opportunities that met the company’s investment criteria. To management, it was appropriate to return the capital to the shareholder.
Today the world is different. The tanker market has weakened straining cash flows on one hand but offering up investment opportunities on the other. In response, management has changed the dividend policy to pay out a fixed annual dividend of $0.50 per share, which is a visible and consistent payout supported by Genmar’s current contracted revenue stream. Jeff Pribor, Chief Financial Officer, commented, “… The adoption of our new dividend target is the result of our Board’s voluntary reassessment of our dividend policy based on current market conditions. We believe it will enable General Maritime to continue its tradition of distributing cash to shareholders during a challenging market environment. By implementing a more conservative payout ratio, we believe we have also strengthened our financial flexibility to enter into future value creating transactions and take advantage of strategic growth opportunities…”
Here, too, credibility goes a long way.
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carisk | Categories:
Freshly Minted,
The Week in Review | August 6th, 2009 |
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Despite a pressing deadline, we couldn’t pass up the opportunity to get out of the office and attend Morgan Stanley’s 2nd Commodities and Shipping Conference. In these difficult times how could one possibly forego the opportunity to hear what Ole Slorer and his team have to say with the added benefit of gleaning some insights on the capital and lending markets. All interspersed with company presentations and lessons from Morgan Stanley’s commodities and freight trading experts. It is a rare opportunity for us to receive an invitation to these investor only meetings and we are most appreciative. Putting on an investor hat for a moment, we can confirm that if one is interested in the space there is no better way to get an education and gather information about this sector than attending these conferences. And, we did not even benefit from having a one-on-one meeting.
Wiley Griffiths, the Head of Global Shipping, and his team started us off with a view of what was happening in the market. Continuing historic trends, the markets as always remain interesting.
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Despite the difficult environment, a veritable who’s who of the shipping community descended on the Jefferies 5th Annual Shipping, Logistics & Offshore Services Conference on Tuesday and Wednesday.
We must confess that walking in at the uncivilized hour of 8 AM to a sparse crowd and seeing Jefferies Magic Eight Balls gave us pause. Was Hamish making a market statement or was he merely giving investors a new forecasting tool? Our conclusion was probably both.
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carisk | Categories:
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Market Commentary | September 18th, 2008 |
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What do Morten Arntzen, Peter Evensen, Jeff Pribor and John Wobensmith have in common? They all began their careers as bankers and have moved over to the ownership side. Clearly, the owners are recognizing the value of banking experience or, perhaps, they are less expensive once brought in house?
Add to that list, Peter Knudsen, formerly head of Project Finance and Asset Lending and now the General Manager of Nordea’s Singapore Branch, who has accepted the position of CEO of Camillo Eitzen & Co. ASA.
Umm! Peder’s been there two weeks already, is this an opportunity for him?
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carisk | Categories:
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People & Places | August 28th, 2008 |
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In a market in which issuing new equity at or above net asset value is nearly impossible, and at a time when high payout shipping companies are struggling to grow, General Maritime’s all stock acquistion of Arlington Tankers not only makes perfect economic sense – the cashless and symbiotic nature of the deal is probably a blueprint for a few more transactions to come.
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carisk | Categories:
Freshly Minted,
The Week in Review | August 7th, 2008 |
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General Maritime Announces Dividend Policy, Picks up Premium
In what we can only assume is an effort to drive up the General Maritime share price in advance of Frontline’s potentially hostile take over, General Maritime has adopted a dividend policy. The play here is that dividend yield paying stocks like Knightsbridge and NAT are being valued on a multiple of dividends, which is significantly higher than the tanker companies that pay small dividends (less than 5 percent) or no dividends at all. The chart on page 2 illustrates this phenomenon
GMR Shares a BUY, with Potential to Reach $53, $62…or Even $76
Based on an NAV of $41.83/share, as estimated by Jefferies, General Maritime would be worth over $76 if it was valued the same way as NAT, and even if it was valued like the more modest yield play Knightsbridge, the share price would still go up over $62. Analysts were quick to match General Maritime’s shift in strategy to a shift in target valuation. Even before the dividend policy announcement, Dahlman Rose & Co. analyst Harvey Stober had initiated coverage on General Maritime with a BUY on January 19, noting that: “With cash accumulating quickly, GMR has the wherewithal to institute a significant dividend or major share repurchase program.” Not long after, General Maritime announced just such a plan. Morgan Stanley quickly moved its target P/NAV for GMR up to 150%, upgrading the company to Overweight V with a target share price of $53. The more bullish Jefferies & Company set a target price at $62, close to what GMR would be at VLCCF’s valuation. What we did not see in the reports, however, was a mention of Frontline.
A Future with FRO? Depends on the Price
Peter Georgiopoulos and Jeff Pribor spoke confidently of making accretive acquisitions and growing the company in their conference call, and for the most part questions from listeners revolved around the details of their plans. Only Natasha Boyden of Cantor Fitzgerald ventured to directly ask about the situation with Frontline and whether this action would have an impact. To this there was a pause, followed by a cautious “I don’t know” before the more confident answer that this strategy change was the result of a long study and careful consideration of company strategy. But then just yesterday Bloomberg TV reported that General Maritime would be interested in a merger with Frontline, saying that Peter Georgiopoulos commented that the rival oil tanker operator would have to pay heavily in cash if he wished to purchase the company.
Whether or not this is in the cards, Mr. Georgiopoulos and Mr. Pribor have already succeeded in having their company reevaluated by leading analysts – Magnus Fyhr and Douglas Mavrinac at Jefferies and Mark MacLean and Ole Slorer at Morgan Stanley – and have watched their stock price shoot up an astonishing 9.81% to $44.65 in just one day. Not only that, but the terms of the dividend policy specify the Board of Director’s intent to establish reserves for maintenance and capital expenditures probably equating to around $100 million in 2005. So while they immediately picked up the premium in share price, the company should have a grace period before it actually has to pay out any cash.
In what we can only assume is an effort to drive up the General Maritime share price in advance of Frontline‘s potentially hostile take over, General Maritime has adopted a dividend policy. The play here is that dividend yield paying stocks like Knightsbridge and NAT are being valued on a multiple of dividends, which is significantly higher than the tanker companies that pay small dividends (less than 5 percent) or no dividends at all. The chart on page 2 illustrates this phenomenon
GMR Shares a BUY, with Potential to Reach $53, $62…or Even $76
Based on an NAV of $41.83/share, as estimated by Jefferies, General Maritime would be worth over $76 if it was valued the same way as NAT, and even if it was valued like the more modest yield play Knightsbridge, the share price would still go up over $62. Analysts were quick to match General Maritime’s shift in strategy to a shift in target valuation. Even before the dividend policy announcement, Dahlman Rose & Co. analyst Harvey Stober had initiated coverage on General Maritime with a BUY on January 19, noting that: “With cash accumulating quickly, GMR has the wherewithal to institute a significant dividend or major share repurchase program.” Not long after, General Maritime announced just such a plan. Morgan Stanley quickly moved its target P/NAV for GMR up to 150%, upgrading the company to Overweight V with a target share price of $53. The more bullish Jefferies & Company set a target price at $62, close to what GMR would be at VLCCF’s valuation. What we did not see in the reports, however, was a mention of Frontline.
A Future with FRO? Depends on the Price
Peter Georgiopoulos and Jeff Pribor spoke confidently of making accretive acquisitions and growing the company in their conference call, and for the most part questions from listeners revolved around the details of their plans. Only Natasha Boyden of Cantor Fitzgerald ventured to directly ask about the situation with Frontline and whether this action would have an impact. To this there was a pause, followed by a cautious “I don’t know” before the more confident answer that this strategy change was the result of a long study and careful consideration of company strategy. But then just yesterday Bloomberg TV reported that General Maritime would be interested in a merger with Frontline, saying that Peter Georgiopoulos commented that the rival oil tanker operator would have to pay heavily in cash if he wished to purchase the company.
Whether or not this is in the cards, Mr. Georgiopoulos and Mr. Pribor have already succeeded in having their company reevaluated by leading analysts – Magnus Fyhr and Douglas Mavrinac at Jefferies and Mark MacLean and Ole Slorer at Morgan Stanley – and have watched their stock price shoot up an astonishing 9.81% to $44.65 in just one day. Not only that, but the terms of the dividend policy specify the Board of Director’s intent to establish reserves for maintenance and capital expenditures probably equating to around $100 million in 2005. So while they immediately picked up the premium in share price, the company should have a grace period before it actually has to pay out any cash.
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carisk | Categories:
Equity,
Freshly Minted | January 27th, 2005 |
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