Links
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.
A Coastwise Move – Kirby Acquires K-Sea
Kirby Corporation announced earlier this week an agreement to acquire K-Sea Transportation Partners L.P., an operator of tank barges and tug boats participating in the U.S. coastwise trade of refined petroleum products. The total value of the transaction is approximately $600 million, consisting of $335 million for the equity and the re-financing of $265 million of K-Sea debt.
Life Preserver – K-Sea Receives Equity Investment and Restructures Debt
Yesterday, K-Sea Transportation Partners L.P. announced that KA First Reserve, LLC (“KA First Reserve”), a partnership between First Reserve and Kayne Anderson Capital Advisors, agreed to invest up to $100 million in exchange for approximately 18.4 million convertible preferred units (the “Preferred Units”). All of the sales proceeds will be used to repay outstanding debt and pay fees and expenses related to the transaction.
The Preferred Units will have a coupon of 13.5%, with payment-in-kind distributions through the quarter ended June 30, 2012 or, earlier, should the Company resume cash distributions on its common units. Applying simple interest, the investment could increase to roughly $130 million over the PIK period. The Preferred Units convert on a unit-for-unit basis into common units at KA First Reserve’s option. The Preferred Units were priced at $5.43 per unit, which represents a 10% premium to the 5-day volume weighted average price of K-Sea’s common units as of August 26, 2010, but a 22% premium to the closing price the day prior to the announcement. The Company will have an option to force conversion after three years if the price of K-Sea’s common units is 150% of the conversion price on average for 20 consecutive days on a volume-weighted basis. In connection with the Preferred Unit investment, KA First Reserve will appoint three directors to the board of K-Sea’s general partner and will be granted the right to acquire a 35% interest in the entity that owns the Company’s Incentive Distribution Rights, or IDRs.
K-Sea In Rough Water
For the first quarter, K-Sea Transportation Partners L.P. reported lower operating results across the board largely reflecting market conditions in the Jones Act trades as well as an impairment charge attributed to an earlier than planned phase out of its single hulls vessels. Based upon its performance, the company cut its dividend from $0.77 to $0.45, a reduction of approximately 58%, and has proactively begun discussions with its banks with respect to potential breaches of covenants in its loan agreements, which may occur by the end of the 2nd or 3rd quarter. The intention is to amend the affected covenants.
As is the case with dividend payers in general and full payout models in particular, the impact of the dividend reduction was substantial with the stock trading down on the day of the announcement to $14 from the prior day close of $22.45, a 37.6% fall. The shares continue to trend downward trading in the $11 to $12 range and are currently yielding 15.6%. The impact of the decline was in all likelihood magnified by the company’s stellar record of increasing distributions over the past 5+ years.
K-Sea Follows-On
K-Sea Transportation Partners L.P. (“K-Sea”) announced last week the pricing of its public offering of 2 million units representing limited partner interests. With Lehman Brothers acting as the sole book-running manager, and RBC Capital Markets, as co-lead manager, the units were priced at $25.80 with expected net proceeds after expenses of $49.8 million. Proceeds will be used to re-pay existing indebtedness and make construction progress payments on newbuildings. Details of the transaction are shown in the Guts of the Deal below.
K-Sea GP: Slice and Dice
How many ways can you take a company public? When it comes to an MLP, there are at least two, as evidenced last week by K-Sea GP Holdings LP’s (“GP Holdings”) announcement that it plans an initial public offering of common units.
Formed in December 2007, GP Holdings’ sole cash generating assets are partnership interests in K-Sea Transportation Partners L.P. (“KSP”). KSP is a publicly traded limited partnership that provides marine transportation, distribution and logistical services for refined petroleum products in the United States. KSP currently operates a fleet of 73 tank barges, one tanker, and 59 tugboats that serves major oil companies, oil traders and refiners.
The Official Guide To Marine Finance Providers
Shipping Index
