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Working for the Government – Eksportfinans Unwinds
Heresy! Despite adherents’ strong belief in capitalism, it was the private solution that failed this time. Eksportfinans ASA, the operator of Norway’s 108-scheme (subsidized fixed interest CIRR loans), was caught by the EU’s Capital Requirement Directive that limits large exposures. In order to comply with the requirements, the company needed to be re-capitalized or required a permanent exemption from that rule. Unfortunately, Eksportfinans and its largest shareholders, DNB Bank (40.0%), Nordea Bank (23.21%), the Kingdom of Norway (15.0%), and Danske Bank (8.09%) could not come to terms on a plan for re-capitalization that would ensure adequate export financing and the government deemed a waiver unlikely.
As a consequence, the government took over the 108-agreement lending scheme, which represents 70% of the loan book, from Eksportfinans, which it intends to replace with a state-funded scheme for export credit financing which will be administered by a government agency. Initially, the government intends to establish an interim financing scheme, managed on behalf of the government by Eksportfinans, with an initial funding of NOK 30 billion, until the permanent scheme is operational, which is expected to be no later than July 1, 2012. During this period, new commitments for CIRR loans will be granted by Eksportfinans, as administrator, with the assets and commitments to be taken over by the newly established agency.
Songa Bond – Offshore Services Has the Ticket to Norwegian Bond Market
Last week, Songa Offshore SE successfully concluded a five year senior unsecured bond issue of NOK 1,400 million, at the high end of the proposed range. Led by First Securities, Nordea Markets and Pareto Securities, the offering was priced at par with a floating rate of six month NIBOR + 10%. With the impetus from a commitment in excess of the minimum amount underwritten by a consortium of investors, the deal was oversubscribed and sold mainly to institutional investors. Although the deal saw demand from the US and UK, the deal was largely placed in the Nordic market, which demand has proved vital in most sizeable deals in the Norwegian market this year. Proceeds of the offering will be used for general corporate purposes, including the initial installment of $113 million on the 2nd Cat-D rig. The company used a credit facility to finance the initial payment on the first rig. See the Guts of the Deal below for more details on the terms of the financing.
Established in 2005, Songa operates an aging fleet of 5 mid-water semi-submersibles to which they have recently added the Songa Eclipse, a new UDW semi-submersible delivered in August and on contract to Total for 18 months. While the average age of the on the water fleet is 25 years, this does not take into account the multiple upgrades to the rigs the company has undertaken, most of which occurred in the last seven years. And while the rigs may be perceived as old they have performed ably with an average quarterly fleet utilization of 93% since 2007. The majority of the rigs are contracted long-term with a total contract backlog of $4.45 billion. According to Nordea’s estimates, annual contract revenue for the balance of 2011 is 100%, 87% in 2012 and 65% in 2013. Counterparty risk is low as the rigs are contracted to major oil companies. Lastly, reflecting the capital intensive nature of the business, the company’s financial risk profile is somewhat aggressive, according to Nadia Bendriss of Nordea who points to net debt/EBITDA of 2.4x, FFO/debt of 26% and EBITDA/interest coverage of 6.4x. On the other hand, the company has improved its debt maturities and liquidity with the addition of the new 8.5 year $420 million facility as well as the $100 million facility.
A Rising Tide Not Only Lifts All Boats, But Also Allows a Recapitalization and Perhaps Even an Exit
Last week, Hapag-Lloyd began marketing a $500 million bond issue in Europe and the U.S. to qualified investors, as part of a debt re-structuring, which will most importantly, stabilize the company’s balance sheet. The company intends to issue $500 million in the aggregate of senior unsecured notes, which will consist of a combination of dollar denominated notes due in 2017 and Euro denominated notes due in 2015. The notes will be guaranteed on a senior basis by “Albert Ballin” Holding, the shareholding entity. Initially, the proceeds of the notes will be escrowed and released only upon the receipt by the company of a minimum of $290 million of proceeds from the K-sure financing (Ex-Im financing, guaranteed by the Korea Trade Insurance Company, for the acquisition of 6 x 8,749 TEU containerships to be built at Hyundai). More details, based upon the preliminary prospectus and market talk, are provided in our Guts of the Deal herein.
OSG Goes the High Yield Route
Following its recent equity offering, OSG announced on Monday its plans to issue $300 million of unsecured senior notes due in 2018. Proceeds will be used to pay down the balance on the company’s $1.8 billion senior revolver due in February 2013 that bears interest at LIBOR + 70 bps. As of year-end, the revolver balance was $654 million and under its terms the facility steps down $150 million annually in 2011 and 2012 before the final maturity in 2013.
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A Bellwether?
The bond market is getting better. As we saw with the Hornbeck bond last month, spreads and trends are improving. The economy seems to be bottoming out and with an improving economy and inflation fears increasing interest rates should follow. The timing for an offering seemed propitious then as it does now.
It was therefore no surprise that Seacor Holdings Inc. (“Seacor”) became one of the first NY-listed “shipping” companies to issue bonds this week when it priced and sold $250 million of 7.375% Senior Notes due in 2019. The issue was priced at 99.239% to yield 7.471%, reflective of the current market and at a much better rate then would have been achievable 6 months ago. This equates to 400 bps spread over like term Treasuries. The issue was well received and several times oversubscribed and despite requests to upsize the deal, Seacor was satisfied at the current level.
US Shipping: An Advisors’ Dream!
While the shipping industry enjoys a remarkable period of prosperity, in a tiny corner of the world chaos appears to reign for the moment.
The small chaotic corner we refer to is the U.S. Flag community, where teams of lawyers are as important as a strong balance sheet, and the right shipyard, political and labor relationships are as fundamental to a CEO’s skill set as shipping market expertise.
The Official Guide To Marine Finance Providers
Shipping Index
