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Success But at a Price – Box Ships’ IPO
Following quickly on the heels of the Golar LNG Partners LP offering, Box Ships Inc., a wholly owned subsidiary of Paragon Shipping Inc. became the second IPO of the year. Approximately three weeks ago, the company filed a registration statement to sell 10 million shares of the common stock of the company, leaving Paragon with a 22.7% stake. The sale would include a green shoe of a further 1.5 million shares. Pricing was expected to be between $15 and $17 per share and assuming midpoint pricing, gross proceeds would be $160 million. The net proceeds of the offering would be used to partially fund the acquisition of an initial fleet of six containerships, including three being acquired from Paragon, with an aggregate capacity of 28,177 TEU.
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.
Stolt-Nielsen Gas Joins Forces with Sungas
Last week, Stolt-Nielsen Gas Ltd. (“SNGL”) reached an agreement with Sungas Holdings Ltd. whereby the latter will become a 50% shareholder in Avance Gas Holdings, with SNGL retaining the other 50%. Under the terms of the agreement, Avance Gas will acquire three VLGCs from Sungas, for which it will receive the 50% stake as well as an undisclosed amount of cash. The three VLGCs of 83,000 cbm were built in Daewoo in 2008. In addition, to these three vessels, Avance’s fleet will consist of one owned vessel, the 2003 built Stolt Avance of 82,200 cbm, another VLGC, which it operates and a chartered-in medium sized gas carrier. Financing will be provided through shareholder loans until external bank financing can be secured. Advised by Lazard, Sungas is controlled by a private Saudi Arabian investor.
Yes, There Was Equity Too
China’s inflation and Ireland’s banking crisis triggered this week’s market volatility. Nevertheless, Scorpio Tankers Inc. and Navios Maritime Acquisition Corporation (“NMA”) moved ahead with equity follow-on offerings. Scorpio’s registration was for a one-off transaction, whereas Navios’ was a supplement to its recently filed broad shelf registration.
Here Come the IPOs
This week two IPOs, one dry and one wet, hit the road with well-known sponsors. First was the Genco inspired BDI play, Baltic Trading Limited, which was followed by Mr. Marinakis’, of Capital Products Partners fame, large tanker vehicle, Crude Carriers Corp. These followed quickly on the heels of the recent Scorpio offering.
BDI Proxy
This was one of the first opportunities we had to watch a road show presentation on the great equalizer, “RetailRoadshow” (http://www.retailroadshow.com/index.asp), a website designed to put retail investors on a level playing field with the institutions. The presentation of Baltic Trading Limited was expertly handled, as one would expect, by Peter G. and John Wobensmith, who will respectively fill the positions of Chairman and President of the new company.
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Paying the Bill
On Tuesday, after the market closed, Aegean Marine Petroleum Network announced that it would utilize its recently effective shelf registration to issue 3,906,000 shares of its common stock in an underwritten public offering. The closing price of the shares was $32.45, which would equate to an equity raise of approximately $126 million on a gross basis. The next day, in a market roiled by news of restricted lending in China, the shares traded up $0.23 to $32.72.
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The Inevitable – Taxes and Restructuring
President Obama’s Proposed International Tax Changes – Will They Truly Achieve Economic Stimulation
Tamara Moravia-Israel of Ernst & Young was forthright in views of the President’s proposed changes in international tax law. It is not good for shipping. And there is a question as to whether it will in fact create jobs, stimulate the economy and increase competitiveness as is suggested. First, the “check the box” regime is proposed to be reformed in that foreign eligible entities with a single owner could be disregarded for federal US tax purposes only if: (1) they are organized in the same country in which the owner is organized or created, or (2) a US person wholly owns them (except for tax avoidance cases). The implications of this are potential conversion of first-tier (for tax avoidance) and second-tier (or lower) foreign disregarded entities (FDEs) to corporations that may have US tax implications. Ms. Moravia-Israel suggests that the current check the box regime allows US multinationals to be on somewhat of a level playing field with its foreign competitors. An additional proposed change by the Obama Administration is the deferral of deductions. That is, there will no longer be allowed a deduction for foreign expenses on the US return unless the foreign source income associated with said foreign expense is recognized for US tax purposes. However the biggest threat comes from the Levin Bill, which Congress is potentially currently considering. In effect, the bill puts forth that a foreign corporation is treated as managed and controlled in the US if substantially all of the executive officers and senior management of the corporation who exercise day-to-day responsibility for making decisions involving strategic, financial, and operational policies of the corporation are located primarily within the US. If the foreign corporation is considered to be managed and controlled in the US, it is treated as a domestic corporation for US tax purposes. This goes against the traditional determination of nexus, which has historically been the location of board meetings.
Fair Exchange
Last week, Navios Holdings (“Navios”) and Navios Maritime Partners (“NMP”) announced the re-structuring of certain arrangements between themselves. First, NMP agreed to acquire from Navios the leasehold rights to the M/V Navios Sagittarius, a 2006 Japanese built Panamax. The purchase price, $34.6 million, will be funded from cash on hand. The vessel is currently chartered out at $26,125, net per day until November 2018 and is expected to generate annual EBITDA of approximately $5.8 million. As part of the acquisition of the leasehold, the new owners have a purchase option beginning in December 2009 at an initial price of $25.9 million and the AA+ European Union charter insurance.
Rashomon – As We See It
It began with the movie “Rashomon” and evolved into a concept. “The Rashomon effect is the effect of the subjectivity of perception on recollection, by which observers of an event are able to produce substantially different but equally plausible accounts of it.” Or as the movie asks, who is telling the truth and what is the truth?
Our version of the script calls for a look at Seaspan’s first quarter earnings announcement to elicit the main takeaways. We then turned to our favorite shipping analysts, including Natasha Boyden of Cantor Fitzgerald, Gregory Lewis of Credit Suisse, Omar Nokta of Dahlman Rose, Douglas Mavrinac of Jefferies, Urs Dür of Lazard and Justin Yagerman of Wachovia, for their views and calls. This becomes a very interesting exercise because, as the analyts tell us, there is no company that is easier to model given their strategy to lock-in costs and fix revenues for the long-term.
Dead Cat Bounce
A “dead cat bounce” is a figurative term used by traders in the finance industry to describe a pattern wherein a spectacular decline in the price of a stock is immediately followed by a moderate and temporary rise before resuming its downward movement, with the connotation that the rise was not an indication of improving circumstances in the fundamentals of the stock. It is derived from the notion that “even a dead cat will bounce if it falls from a great height”. (Wikipedia)
This concept was brought to mind by the recent activity in dry bulk stocks where heavy volumes have been traded and prices have taken substantial leaps in percentage terms. Have the shares bottomed? Or as Urs Dür of Lazard suggests in more sophisticated terms: “…this most recent upturn in the names, with historically high trade volumes, may be based more on anticipation of an upturn than on clear evidence for a fundamental turn.”
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The Official Guide To Marine Finance Providers
Shipping Index
