…. more education about shipping is key to attract investor appetite in London.
Marine Money returned to London after a long absence to host a wonderful 1st annual conference on 21st January 2010. This was the first of 14 Marine Money conferences for 2010 and we got off to a cracking start. Over 180 delegates and speakers attended with about one third coming from overseas.
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Written by:
carisk | Categories:
Forums,
Freshly Minted | January 28th, 2010 |
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“Nothing in Life is to be Feared, it is only to be understood. Now is the time to understand more, so that we may fear less” Marie Curie, as quoted by Raghu Narain
We’ve had a lot of talk at our conferences lately about survival tools for the current market, whether these be bringing down costs, managing vessels properly, working out loans, hedging risks or any other manner of prudent activity. But we may, arguably, have left out the most important one: a sense of humor. And through the pessimism that pervaded our conference in Hong Kong, as we’re fairly sure pervades any rational discussion about prospects for ship finance, it was this persistent good humor that allowed owners, bankers, lawyers and analysts to get up and discuss openly the present situation and the pain that is still to come. It allowed them to engage one another on contentious topics to form realistic assessments and strategies. It allowed them to answer hard questions and make unpleasant predictions. In short, it allowed them to face the reality of the present crisis, and that together with a constant search for the understanding described by Marie Curie is very likely the little secret behind their resiliency to date.
Contributing significantly to this understanding was opening speaker Louis-Vincent Gave of GaveKal, a financial services firm that offers institutional investors and high net worth individuals fund management, independent research on global macro-economic trends and events, and independent advisory work on China and its impact on the global economy. Continue Reading
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nhuvane | Categories:
Asia,
Conferences | April 9th, 2009 |
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In line with the robust Asian ship finance market, Marine Money Asia has expanded its team and moved into new offices at the Winsland House located at 3 Killiney Road in Singapore. Stepping in as Director will be Marine Money International’s Managing Editor Nora Huvane. Nora will be working with Financial Analyst Rodricks Wong and Sales Manager Teck Wee to coordinate Marine Money Asia’s global activities. Nora brings years of editorial and financial analysis experience with Marine Money to ensure that the Marine Money Asia publication continues to grow and evolve and that Asian ship finance is well-represented in Marine Money’s global publications.
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Written by:
carisk | Categories:
Freshly Minted,
People & Places | July 31st, 2008 |
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Marine Money together with HVB hosted the seventh annual German ship finance forum in Hamburg this week, and what resulted was fairly amazing. Not only is the market one of the most sophisticated in the world and have a does the market’s size rival that of New York, but the credit crunch has driven owners and bankers alike to think far more creatively about their approach to deal-making, from bringing in more geographically diverse bankers to realizing the full equity investment potential that can be realized by moving beyond the KG model. We believe the market is worthy of much attention and take some time here to review some highlights before moving into a discussion of some recent transactions.
Written by:
carisk | Categories:
Freshly Minted,
German Focus | February 28th, 2008 |
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Last Friday, Moscow, Russia was the center of the international ship finance industry with Sovcomflot’s annual banker meeting on Thursday – with over 80 international and domestic ship finance bankers – and Marine Money’s ship finance forum the following day attracting over 160 delegates. Not to forget the energy minister of Norway’s visit to the Kremlin and the U.S. Minister of Energy’s visit to Russia this week in an effort to explore the opportunities of Russia’s promising energy industry.
Following Sovcomflot’s banker meeting and cultural session, Marine Money and Sovcomflot had their joint dinner for over 100 speakers and bankers at the new Gorki restaurant, making it one of the best speakers’ dinners in a long time. Music lover and CEO of Sovcomflot Mr. Sergey Frank had organized the music entertainment with live music from one of Russia’s most popular groups, setting the stage for a great night filled with Russian food and vodka.
The forum was the first of its kind in Russia, and comes as a result of the increasing interest from the international banks to finance Russian shipping companies. Today the four big Russian shipping companies – Sovcomflot, Novoship, FESCO and Primorsk – all have access to the international banks, but there are still another 50-60 Russian shipping companies who do not get international financing. The forum was established largely to investigate if this can be done in the future. The answer is that came out was “Yes, but…” The but specified that as a prerequisite, the Russian companies need to acknowledge the following:
• Vessels must be non-Russian flag to ease the banks concern in case of default
• Shipping companies should have an offshore structure
• Vessels should have long-term employment with international, or preferably known Russian, charterers
This doesn’t leave a lot of Russian aside from the management and the seafarers handling the ships. Then again, Russians are known for their skilled and loyal maritime management and the maritime skills of their seafarers, the result of several hundred years of shipping tradition.
At the forum, the commercial bankers’ panel admitted that this is why they are comfortable and happy to do business with the four big shipping companies who adhere to the noted conditions, and it is clear that it is attention to these that is needed for the other smaller companies if they wish to attract international finance.
In addition to this, we must remember that the country risk of Russia has improved substantially, and down the road the international banks might even be comfortable financing Russian flag vessels, granted that the Russian state reduces the well-known complexity of its tax laws. We learned that Russia is contemplating setting up a Russian International Ship Registry similar to that of Norway and Denmark, so the process is in motion, but how long it will take is yet to be seen.
Overall, the forum was a great start for what is expected to be a great opportunity for ship finance deals to come. The co-chairman, Mr. Ivar Hansson Myklebust of Nordea Bank, drew a comparison to Brazil and how the oil majors have not only attracted international finance for themselves, but also introduced the banks to the local shipping companies. Not too long ago, there were very few international banks comfortable doing business there, but today, as we know, this picture looks very different. With Russia sitting on an estimated 1/4 of the world’s oil and gas reserves, the establishment of solid companies such as Gazprom, Lukoil, Rosneft, and Transneft, and the credibility of the larger Russian shipping companies, we hope the way can be shown for the other Russian shipping companies to attract the international finance many need grow take their businesses to the next level. We look forward to next time, when we can see how this has developed.
Written by:
carisk | Categories:
Freshly Minted,
People & Places | May 26th, 2005 |
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First Jefferies, then Cantor Fitzgerald, and now Dahlman Rose has become the third institution to issue analytical reports on DryShips recommending that investors buy the company’s stock. It is particularly interesting that all the analysts agree the shares should be bought considering that two thirds of respondents to our 2005 Marine Money Banker Survey, given the option to buy shares in DryShips with their own money, would buy none at all. The company’s share price has also fallen notably off its high of $23.90, but at $18.88 at press time, is still up from the issue price of $18.00.
This suggests that long-time shipping bankers are concerned about George Economou’s history and probably suspicious of the incredible market reception the deal was given. At the same time, analysts running numbers on what are currently high asset values and reasonably high charter rates are coming to the conclusion that the company, which has bought a slew of ships since its offering, will bring in a lot of cash. Investors expect George to wow Wall Street with 1Q05 numbers to quiet some of the criticism, and most likely in the long-term the truth, as always, will be somewhere in between.
It’s all about the arbitrage these days.
What we mean by this, of course, is the fact that ships have a higher value on Wall Street than they do in the shipping markets – and not surprisingly there is a steady stream of people looking to capture the difference.
For proof of this, one need only to look at our Cash Flow Multiples by Vessel Type valuation table and compare it to the “Fair Value” table showing the valuation of shipping companies that trade on the stock exchange. It depends on the age of the vessels, of course, but on average a shipowner can buy a middle-aged vessel at about 4x cash flow and sell it to Wall Street investors at about 6x cash flow – much more if the company is valued based on its dividend yield.
Here’s where the rubber meets the road: by valuing shipping companies using a multiple of their cash flow generation, issuers of equity can effectively sell their vessels for 1.5-2.0x their value in the sale and purchase market. It is a truly remarkable moment in the evolution of shipping and the capital markets – and not surprisingly the Delta flight between Athens and New York is once again being seen as a direct journey to wealth and early retirement for shipping dealmakers.
A Growing Party – Private Equity Funds Enter
In the early stages of this “multiple expansion” (or “bubble” for cynics) process on Wall Street, issuers of equity were largely financially savvy shipping companies that realized that by selling ships, and leasing them back as Stena did with Arlington Tankers, they could extract the premium value of their ships while at the same time maintain commercial control and chartering “upside.”
However, as we move into year three of the shipping bull market, we are beginning to see private equity funds hire some shipping professionals and form new companies for the purpose of buying ships at 4x cash flow and selling them to Wall Street for 6x cash flow – capturing the arbitrage along the way.
Not surprisingly, most of these private equity investors are focusing on the dry bulk sector where the fundamentals are rosy, and more importantly, the valuations are higher, even in situations with external management companies with older vessels.
There are several deals presently preparing or considering coming to market in which the issuer is a private equity fund, or “sponsor” as they are called, looking to capture the value arbitrage, but the first has finally reached the starting line – a newly-formed entity called Eagle Bulk Shipping owned by a private equity fund in New York called Kelso and comprised of former Credit Suisse investment bankers.
We’d like to take a moment to discuss why this deal has filed. For those readers less familiar with the S.E.C, there are two kinds of registration forms used for equity – the F-1 and the S-1 – the former of which is used by foreign-based filers and the latter by U.S.-based filers. The documents are virtually the same except for one critical difference: foreign filers using form F-1 are permitted to submit their initial prospectus filing confidentially while U.S. filers are not. That is why companies such as TBS Shipping, Horizon Lines and now Eagle Bulk Shipping have documents accessible to the public while foreign filers such as DryShips and Diana do not have their registration statements made public until they have finished with the SEC comment period and are ready to print red herrings and go out on the road. But we digress…
The first financial sponsor deal, Eagle Bulk, is hoping to raise up to $250 million through a listing on the Nasdaq under the ticker symbol EGLE. Start-up companies use the NASDAQ because it does not have the same requirements for previous years of existence and profitability that the NYSE imposes. Joint bookrunners on the deal are UBS Investment Bank and Bear, Stearns & Co. – a pair of that seems to have either officially or unofficially teamed up to underwrite shipping deals. Legal advice is being provided by Simpson, Thacher & Bartlett for the underwriter and Seward & Kissel for the issuer.
What is unique about this IPO is that the company did not actually own any vessels at the time it filed its S-1 with the SEC. A quick look at the balance sheet shows that virtually all of the company’s net worth is associated with the deposits paid to secure vessels delivering in April to June 2005. We’re sure that some of the vessels have been delivered by now and there is nothing inherently wrong with this, but it is clear that the issuer has been formed for the express purpose of the IPO.
Although we will refrain from getting into valuation issues, Eagle’s fleet will consist of 11 modern handymax dry bulk vessels, nine of which have been acquired and two of which are to be delivered in June 2005, as shown in the accompanying chart. The vessels range in size from 40,000 to 60,000 dwt and have an average age of six years, as compared to the global handymax fleet average age of 15 years. In a small industry where nothing is secret, management did a good job hiding their purchases from the market and industry publications such as Tradewinds. It is still true that if the sellers know you have plans or money, the price goes up.
Management
The management team is lead by 39-year old Sophocles Zoullas, and Alan Ginsberg, a former editor of Marine Money, will serve as CFO. The rest of the directors are drawn from private equity fund Kelso, which is sponsoring the deal, and Norlands Shipping. This team will focus on strategic and commercial management, while technical management will be done by V. Ships.
The company’s pitch is that by focusing on handymax dry bulk vessels, they will have advantages that include reduced volatility in charter rates, a smaller newbuilding orderbook, increased operating flexibility, the ability to access more ports, the ability to carry a more diverse range of cargoes, and a broader customer base.
Strategy: Buy With Debt, Backfill with Equity
There’s a whiff of Diana Shipping and Nordic American to the Eagle deal, thanks to the fact that Bear Stearns is involved in all three. The company is planning to use the proceeds of the IPO to paying off existing debt and will enter into a new 10-year $330 million credit facility to refinance other existing debt, acquire additional vessels and fund general corporate purposes. Eagle plans to keep lower than industry average levels of debt. The company has not committed to a specific dividend and will leave the decision to the discretion of the company’s board of directors.
Written by:
carisk | Categories:
Equity,
Freshly Minted | April 7th, 2005 |
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For many years, Marine Money conferences have featured presentations asserting the theory that when public markets begin to value shipping companies at a premium to net asset value, the entire ownership structure of the industry will change. The change, it was said, would be inevitable because public companies would have a lower cost of capital and could therefore be more competitive on the single largest daily expense item – money.
After years of theorizing, this fundamental change appears to be underway. Although the larger and more established public companies such as Teekay and OSG have seen this situation for some time, we believe the emergence and aggressiveness of Top Tankers has really been the catalyst for a change of psychology in Greece – the change in psychology is that there are only three options: to be public, to sell to a public company, or to slowly liquidate assets. Although figures vary since foreign companies are able to make confidential filings for IPOs, we understand there are about 15 deals in registration, comments and drafting currently.
One of the most startling examples of the change that is taking place is the ”broker talk” this week that Top Tankers has reached a deal to acquire AM Nomikos. Top has been an aggressive buyer since going public last July, but to date has picked up unwanted vessels such as the older ships owned by Sovkomflot and suezmaxes that Essar had been marketing for some time.
But the acquisition of Nomikos, if it is true, is something else entirely; the idea that a company like Top, which at this time last year was a private company with very few ships, can acquire the entire fleet of a company like Nomikos, a multi-generational blue chip shipping company with a premier fleet and reputation that was never even for sale, has been a real eye opener. We imagine that Top presented Nomikos with an offer the company simply couldn’t refuse, about $50 million over already high asset prices from our rough and dirty calculations.
If, as we mentioned above, sensible private shipping companies have three options, going public, selling to a public company or slowly liquidating, Nomikos chose option number two. In an effort to understand why this deal appears to have been consummated, we thought we’d do some math.
As you can see from the fleet list and valuation, the Nomikos ships are worth about $415 million. Using full employment, current spot rate estimates, the company would generate $174 million in cashflow in the current 12-month period. Using public comparables, if Nomikos had decided to go public, their fleet could have been valued at about 4x cash flow, or almost $700 million. The major difference, of course, is that when a company goes public, the selling shareholders generally extract a healthy valuation and keep control of the company and management of the vessels, which generally employs family members.
However, if the deal ever comes to fruition, judging from the valuation of Nomikos, it offers them a chance to get a full valuation from their fleet without taking the risk of doing a public offering. The IPO is a consuming process that can take as few as four months but much longer if there are accounting issues. Pre-funding expenses can be about $1.5 million, so if the equity market and/or the shipping markets do not cooperate, the entire effort can be made in vain.
For certain it has been a sobering year for shipping markets and for the whole world. The confluence of events that really started with the beginning of the recession in the US, highlighted by the travesty of September 11th and punctuated by the “War on Terror”, Enron, the analyst fiasco and even shipping share ACLN (the first forcibly de-listed NYSE company in 27 years), has made the whole appearance and feel of the world completely different. One of the better offshoots of the financial/business headaches is the growth in importance of transparency in the shipping business.
The day this note is being written NIB Capital in the Hague acknowledged that it was securitizing $670m in shipping debt in five classes rated from S&P AA+ to BBB. Yes they have some investment grade debt! Marketing started on June 6th and is to target non- shipping institutional investors in collateralized debt. NIB notes that the move is to diversify risk so that it can grow its $2 billion shipping book further with the $670m constituting about 5-6% of the total credit portfolio of the entire bank. This Editor finds it a very positive move for any bank to do such and the hardest thing in the process was likely structuring the deal so that the rating agencies would even look at it. Not that the loans were or are bad, but the process must have been grueling. Continue Reading
Written by:
carisk | Categories:
Company News | June 1st, 2002 |
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