Wall Street We Have a Problem

Like a phoenix arising from the ashes of U.S. Shipping Partners L.P., American Petroleum Tankers Holding LLC (“APT”) has come to the market offering $275 million First Priority Senior Secured Notes due in 2015. The company’s equity sponsors, Blackstone (75%) and Cerberus (25%) intend to use the proceeds of the offering to escrow  $169.9 million for the construction and acquisition of the last two of five 49,000 DWT product tankers ordered at NASSCO, the M/T Empire State and M/T Evergreen State, to refinance the existing senior secured loan facility of $96.6 million and pay $8.5 million in transaction fees and expenses. The notes are rated B1 and B+, highly speculative, by Moody’s and S&P respectively.

The company’s fleet of five product carriers is the youngest in the Jones Act Fleet. The first three vessels, Golden State, Pelican State and Sunshine State, are chartered to major oil companies, BP, Marathon and Chevron respectively with the last two to be delivered upon completion to the Military Sealift Command (“MSC”). The charter terms vary with the Golden State and Pelican State on 7-year and 3-year charters respectively. The Sunshine State is on a 9-month charter and, as is typical with the MSC, the last two vessels are on 1-year charters with annual options to avoid a full five-year commitment. The five-year tenor of the notes likely reflects the charter profile.
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The Week in Review

While there are rumors of a number of IPOs in the works, volatility and uncertainty has all but brought the US equity markets to a stop, and we don’t expect to see much more done over the summer. Bank debt has not proved as much of a problem for shipping. Most recently this week Deutsche Bank and HSH Nordbank acted as MLAs on a $753.1 million loan for E. R. Schiffhart GmbH & Cie KG to finance ten capesize bulkers currently under construction in Korea by the Hyundai Group with delivery expected throughout 2010. BNP Paribas, Commerzbank and Dresdner Kleinwort joined DB and HSH as arrangers while Deutsche Schiffsbank came in as a co-arranger for the deal, which finances 71% of the $1,056 million project cost and covers both pre and post-delivery financing. Notably Ralph Bedranowsky of Deutsche Bank and Harald Kuznik of HSH both hailed the deal as an example of “the global shipping market…returning to reasonable, market-consistent valuations…”
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