Links
Pacific Drilling’s $500 Million Private Placement
Pacific Drilling S.A. announced last week its intention to offer 50,000,000 common shares in a private placement to qualified investors. The share price is expected to range between $9.20 and $10.50, raising proceeds of approximately $500 million. The proceeds of the offering will be used to finance the Pacific Khamsin and Pacific Sharav, two new advanced capability, ultra-deepwater drillships which were contracted this month at Samsung Heavy Industries (“SHI”) for delivery in the 2nd and 3rd quarter of 2013 respectively. Similar to the four drillships previously ordered at the yard, the latest new orders are capable of drilling in water depths of 12,000 feet to a depth of 40,000 feet. The aggregate contract price for the two rigs is $1 billion, with the total cost of each vessel, including commissioning and testing and other costs, to be approximately $600 million, excluding capitalized interest.
Busy Week in the Capital Markets
Congratulations to a Whole Host of Principals and Professionals!
If there is one clear trend that is emerging in the evolution of shipping in the capital markets these days, it is the increasing role of experienced, serial issuers who control multiple companies in different market sectors. This week alone we have Ms. Frangou’s Navios on the road with a high yield bond, Mr. Fredriksen’s Golar on the road with an IPO and Mr. Georgiopoulos’ General Maritime recapitalizing its balance sheet with offerings of both debt and equity. Danaos and DryShips rounded out the week’s activities.
Skillfully blending fresh equity and debt with a generous term out of its current debt facilities, the team at General Maritime announced two transactions this week that successfully achieved the desired result; raising ample liquidity to ensure the company’s financial health with minimal dilution to its existing common shareholders. A transaction of this sensitivity, scale and complexity requires the skill and cooperation of a broad team of people.
The same can be said for any one of this week’s deals, so we would like to extend our congratulations to the key players: Nordea, DnB, Jefferies, Dahlman Rose, Citi, BoA Merrill Lynch, Morgan Stanley, Deutsche, Evercore, S. Goldman, Credit Suisse and, of course, long time General Maritime supporter Oak Tree, who all worked hard to make this one week a week to remember.
Marine Money upcoming conferences, please visit www.marinemoney.com for more details:
Houston, May 4
Istanbul, May 11
Oslo, May 26
Marine Money Week, New York City, June 21-23
Sound Bites
The Hellenic/Norwegian-American Chambers of Commerce 17th Annual Joint Shipping Conference was held on Tuesday. It began with Morgan Stanley’s Fotis Giannakoulis telling us everything we need to know about everything to make a decision in these uncertain markets. But for us it is all about finance, so we provide below some sound bites from the conference:
“…Ask and you shall receive…”
The overriding theme of capital being available to existing companies continues. Both DHT Holdings Inc. (“DHT”) and Teekay Tankers Ltd successfully concluded overnight follow-on equity offerings last week and both were well received.
DHT initially announced plans to offer 8 million shares in an underwritten public offering, “subject to market conditions.” Market conditions were certainly good with the transaction approximately 3 times oversubscribed. The offer was upsized approximately 93% to 15.5 million shares, which included an exercised underwriter’s option to purchase up to 2.025 million shares to cover overallotments. The shares were offered at a discount range of 8-10% of the closing price on February 3rd of $5.08. The strong demand resulted in the transaction being priced at $4.65/share equal to a discount of 8.4%. Proceeds will be used for general corporate purposes, which may include, without limitation, vessel acquisitions, business acquisitions or other strategic alliances, reduction of outstanding borrowings, capital expenditures and working capital.
Stop Presses
Just as we were ready to publish, DHT Holdings and Teekay Tankers announced follow-on equity offerings. DHT intends to offer 8 million shares and will use the proceeds, approximately $40 million based upon today’s closing price, for general corporate purposes. The joint bookrunning managers are UBS, BofA Merrill Lynch and Citi. Dahlman Rose will act as Co-manager and Carnegie as sales agent in Scandinavia.
Like a Good Neighbor, MSC Is There
The power of relationship cannot be overstated. Mediterranean Shipping Company S.A. (“MSC”) and Costamare Inc. have worked together for years and have developed the archetypical relationship between tonnage supplier and liner company. It is a symbiotic relationship with each party benefitting, Costamare provides tonnage as needed, while MSC provides the long-term time charter which provides an additional backstop to the build to order vessel.
Name Change Needed – DRYS Goes Wet
It should come as no surprise that George Economou’s DryShips was in the news. First, there was the announcement that the private placement of shares in Ocean Rig UDW was successfully closed with total gross proceeds of $500 million raised. Not only was it a success from the perspective of the capital raise, the company achieved a superior market valuation, both in terms of the rigs themselves as well as in relation to its peers, according to Scott Burk of Oppenheimer. But perhaps more importantly, the company now has a balance sheet which is self-sustaining.
This news was immediately followed by the company’s announcement that the Board of Directors had approved a share purchase program for up to $25 million of common stock of Ocean Rig for the first quarter of 2011. The maximum share purchase price is capped at $17.50, the offering price of the shares.
But why stop there? In furtherance of its diversification strategy, the company announced that it had entered into agreements with Samsung to purchase twelve high specification newbuilding tankers at a cost of $770 million. The order consists of six Aframax tankers, of which four will deliver in 2011 and two in 2012, and six Suezmax tankers, of which one will deliver in 2011, two in 2012 and three in 2013. Given the delivery dates involved, the majority of these were clearly re-sales, which is further affirmed by the favorable payment terms of approximately 70% of the contract price per vessel due at delivery. On the other hand, as Erik Nikolai Stavseth of Arctic Securities points out Samsung is involved in the construction of its drillships and the tanker order must be viewed in the context of the total relationship with the shipyard. The company has paid in $120 million from its cash as the down payment on the tankers and intends to finance the balance from cash on hand and bank debt. Ultimately, the intention is to position the company for a spin-off or IPO.
The deal has engendered much discussion among the analysts, particularly with respect to the price paid and the original contracting party. DryShips tried to head off discussion of the former by describing the vessels as having high specification and over $3 million in extras per vessel. Nevertheless, Pareto, Oppenheimer and Morgan Stanley suggest that the company paid a premium of $11 million, $38 million and $50 million respectively for the entire package based upon their analyses. The bigger question arose when the observant analysts noted that Mr. Economou’s private company, Cardiff Marine, had a similar order in place, raising the question as to whether the vessels were in fact purchased from Cardiff or were purchased directly from Samsung. Management made it clear that the transaction was done directly with the shipyard.
While speculation on such a move initially centered on containers, DryShips’ need to resolve Ocean Rig’s financing and the speedy recovery in the container space foreclosed that opportunity. While near-term prospects for tankers do not look bright, most analysts believe, as does Mr. Economou, in an improving medium and long-term outlook. In the interim, DryShips is a diversified holding company with interests in dry bulk, crude oil tankers and offshore drilling.
At Long Last, the Spin-off (Partial and Private) of Ocean Rig
After announcing the successful completion of its $350 million ATM offering on Friday, DryShips announced that its wholly owned subsidiary, Ocean Rig UDW, intends to offer through a private placement approximately $500 million worth of Ocean Rig’s common shares in exchange for a 20% to 22% stake. The transaction has an extremely short time-line with the deal expected to close this month. The offering will be made to Norwegian private investors, and other qualified investors outside of the U.S. In addition there will be a concurrent private placement in the U.S. under 144A to qualified institutional buyers. Nevertheless, based upon the choice of managers, DnB NOR, Fearnley Fonds and Pareto, and the tight time frame, we expect the focus to largely be in Norway, where the “offshore” is part of investors’ DNA. The net proceeds of the offering are expected to be used to finance the construction costs of the four drillships under construction in Samsung, to exercise the recently announced options to construct a further four UDW drillships, and general corporate purposes.
Continue Reading
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.
Shipping IPOs Stage a Comeback – Costamare Files
With the IPO market for shipping shares quiescent since March, Costamare Inc. broke the ice last week and filed its F-1 to begin the process of an initial public offering of its shares. The company is offering 13.3 million shares, which will represent 22.1% of the shares outstanding immediately after the offering, without giving effect to the green shoe. The expected price range is $15 to $17. Assuming pricing at the midpoint, gross proceeds will approximate $213 million and the market value of the company will be $965 million. Proceeds will be used for general corporate purposes and potential future acquisitions. The company may also use a portion of the net proceeds, together with debt financing, to fund it’s already contracted containership acquisitions. Finally, pending any of the preceding, the proceeds may be applied to temporarily reduce outstanding indebtedness. The company intends to pay a quarterly dividend of $0.25/share, which is based upon a payout ratio of 60% to 70% of distributable cash flow. This equates to a yield of 6.25% on the midpoint price. More details on the transaction are included in our Guts of the Deal shown below.
The Official Guide To Marine Finance Providers
Shipping Index
