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APM Goes Back to the Bond Market
Having had its first taste last year, A.P. Moller-Maersk (“APM”) returned to the public bond market a couple of weeks ago, issuing EUR 500 million of 7-year bonds with a coupon of 4.375%. The net proceeds will be used for general corporate purposes. Unsurprisingly, investor interest was strong with the bonds being more than three times oversubscribed. As a point of comparison, last year’s issue of EUR 750 million 5-year bonds carried a coupon of 4.875%. Placed by Barclays Capital, BNP Paribas, Danske Bank, HSBC and RBS, the bonds will be listed on the Luxembourg Stock Exchange.
The Importance of Self Preservation
In 2009, the equity markets had a roller coaster run, but some shipping companies found windows of opportunity for share placements, often tied to debt reduction. Self help through raising equity capital for balance sheet recapitalization is one way to ride through the difficult times. There had been varying degrees of success and among the most notable would be Neptune Oriental Lines’ (“NOL”) USD 972 million rights issue in June and NYK’s recently concluded JPY 116.4 billion (USD 1.3 billion) global equity offering. Continue Reading
Pipavav Shipyard
This week, we are impressed to see another shipyard finding success in the IPO market. This makes India’s Pipavav Shipyard the third successful shipbuilder to raise equity following Taiwan’s China Shipbuilding Corporation and Malaysia’s TAS Offshore since the beginning of this year.
Pipavav Shipyard will soon be listed on the Bombay Stock Exchange and National Stock Exchange upon the completion of its book building. The private shipyard has offered its shares at a price band of Rs 55 – 60 a piece and plans to raise between Rs 4.7 billion (USD 98 million) and Rs 510 billion (USD 106 million). This amount is significantly lesser than the USD 200 million it had previously planned when the shipyard registered its IPO during the first quarter of 2008. Out of the 85.45 million shares on offer, 2.6 million shares have been set aside for the employees. We have provided a summary of the transaction in the Guts of the Deal table that follows. JM Financial Consultants, Citigroup Global Markets India, Enam Securities and SBI Capital Markets are the appointed bookrunners for this IPO. Continue Reading
Mermaid Looks for Mr Right
Singapore listed Mermaid Maritime is planning a renounceable fully-underwritten rights issue of 243,542,403 new shares. The drilling and subsea engineering services provider plans to raise gross proceeds of approximately SGD 156 million (USD 110 million) at an issue price of SGD 0.64 per Rights Shares. The offering price represents a 29.7% discount to the closing price on 17 September 2009 and will be offered on the basis of 9 Rights Shares for every 20 existing shares.
As a demonstration of commitment and confidence in Mermaid, majority shareholder Thoresen Thai Agencies Public Company Limited (“TTA”) has provided an irrevocable undertaking to subscribe for all its entitlement and will also apply for excess rights shares to ensure it holds at least 51% of the total enlarged share capital of Mermaid in order to comply with Thai law requirements on majority Thai ownership.
The proceeds will be use to provide Mermaid with greater financial capacity to pursue both tactical and strategic growth opportunities. Merrill Lynch (Singapore) is the appointed manager and underwriter for the Rights Issue.
CIC Spends USD 850 million on Noble
Commodity trader Noble Group has placed 573 million shares to China’s sovereign wealth fund, China Investment Corporation (“CIC”), for a total consideration of USD 850 million. The issue price of SGD 2.1137 (USD 1.4956) was a 7.34% discount to the weighted average price of Noble shares traded on the Singapore Exchange between September 14 and September 15. In return, CIC is now a 15% shareholder in Noble and could play a larger strategic role in the group’s diverse agricultural activities, taking into account China’s strong appetite for commodities. CEO Richard Elman will reduce its shareholdings by 2% or 135 million shares while Noble will issue 438 million new shares to raise additional capital to pursue strategic investments in key agricultural markets globally. Continue Reading
Even the Analysts Wonder
We arrived at work last Friday morning to the rather surprising news that DryShips, clearly seeing the opportunity, had once again gone out into the equity market. The company announced its second ATM Equity Offering through Merrill Lynch for up to $475 million of the company’s common shares. Back in January, DryShips had entered into an earlier agreement to sell up to $500 million, which it completed last month selling a total of approximately 95.7 million shares, generating net proceeds of ~$487.5 million after commissions. An ATM equity offering allows the company to issue common shares at any time and at the company’s discretion.
What Do DryShips And The U.S. Government Have In Common?
The answer is they both seem to be issuing lots of paper. Last week, DryShips announced two transactions designed to reduce their future financial commitments. In the first instance, it transferred its interest in three Capesize newbuildings to an unaffiliated entity generating savings of $364 million in exchange for total consideration of $116.4 million. The latter consists of $36.4 million in previously paid deposits, $30 million paid to the purchaser and two additional tranches of $25 million payable to the purchaser within 30 and 60 days respectively. The last two tranches are payable either in cash or, at the option of the company, by issuing 2.6 million shares of common stock for each tranche.
Not surprisingly, the company also unwound the previously announced acquisition of 9 Capesize bulkcarriers from affiliates of Cardiff Marine, George Economou and third parties for $1.17 billion, which was to be paid for with 19.4 million shares of the company’s common shares and the assumption of $478.3 million in debt and future commitments. The consideration to cancel this transaction will consist of the issuance of 6.5 million shares to the unaffiliated entities, subject to a six-month lock-up. The affiliated entities will receive 3.5 million warrants that give the holders the right to purchase one share of DryShips stock. The warrants will be priced at $0.01 and will have strike prices, depending on the relevant tranches of between $20 and $30 per share. Vesting will be over 18 months with an expiry of 5 years.
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Dividends Anyone?
With the recent collapse of both commodity prices and the BDI, share prices, particularly on the dry side, quickly followed suit. A decline in share price is never good news, but for the high paying dividend companies it was a double-edged sword. As yield and share price track inversely, the nominal dividends on these shares now equate to extraordinary yields. The whispered question on the street is whether the high dividend paying companies, given the poor market and lack of liquidity, will cut their dividends. Thus far two companies have answered this week with a resounding no. OceanFreight declared its 3rd quarter dividend at the current level. And demonstrating even greater confidence, Navios Maritime Partners increased its 3rd quarter dividend by 10% and announced that the 4th quarter dividend would also be increased by a further 4%.
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That Was The Week That Was
Marine Money’s flagship conference came to New York this week and if you were a kid you might refer to it as a three- ring circus. With the conference as the centerpiece, the week has become filled not only with the usual owner/banker meetings but formal presentations and the usual bevy of social events. The numbers are astounding with over 1,000 delegates registered this year, exceeding by far all previous years. In fact, as quickly as we printed a copy of the delegate list, we found it to be obsolete.
Transaction Report
It was great news for the equity markets this week when Safe Bulkers got out its Merrill Lynch and Credit Suisse- led IPO. While the deal did price $1.00 below its $20-$22 target range, it’s been so long since we’ve seen any shipping IPOs that the very fact of a new deal getting done is a good sign. But the real interest this week was in the oil market, and Marine Money could not have asked for a better time to host its 10th annual Norway Ship & Offshore Finance Forum. The gathering was full of those hearty souls that will shape the next generation of oil production and discovery, financing and building machines to pull oil out of 12,000 feet of water, through thousands of miles of crusted salt, and anywhere else it can be found. The gathering formed the epicenter of the activity that is the focus of the better part of the world’s citizens.
The Official Guide To Marine Finance Providers
Shipping Index
