Believe the Story or Bet on the Come

Yesterday, Jefferies held its Annual Shipping Conference and, according to Hamish Norton it was a record turnout with over 400 delegates and 40 companies represented. When we were queried about the mood, we hard pressed to provide an answer. There was neither excitement nor was their panic. The closest comparison we could come up with was window shopping. The presentations for the most part were excellent, but the audience appeared detached. Had they seen it all before or was the action taking place behind the scenes in the break outs and one-on-ones? Nonetheless, in line with our thesis, the tanker presentations seemed the most crowded. Genmar, for example, was sold out while the non-U.S. listed companies and service industries garnered the least attention. But then again this was a NY shipping crowd.

The state of the sectors was irrelevant, as all presenters found reason for optimism, well placed or not. Dry has clearly been on the rise, with speakers touting 40% non-deliveries and record scrapping. While on the wet side, consensus suggests 2012 will also be difficult, but the glass is half full with opportunities expected to arise as a result. Lastly, the container ship lessors seem to have blinders on banking on the liners’ liquidity and ability to access capital as losses compound even as they try to get rate increases.

We provide some of our favorite vignettes below.

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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

Navios, Yet Again

Last week Navios Maritime Holdings announced that it had acquired two additional Capesize vessels, currently under construction at the same South Korean shipyard for delivery in the 2nd half of 2010. As it has in the past, the company purchased the vessels for a combination of bank debt, cash and mandatorily convertible preferred stock. As Ms. Frangou noted in discussing the transaction, “Using mandatorily convertible preferred stock continues to be a competitive advantage as we are able to issue equity significantly above the current market price of our common stock while engaging in transactions that are accretive to our existing shareholders. To date we have employed this financing technique to acquire six new building Capesize vessels and refinance three existing Capesize vessels.”
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Bright Spots

On the positive side, we can report on two deals that were announced this week.

Navios Clears Up Uncertainty
Navios Maritime Holdings shored up its balance sheet and cleared up any concerns about its ability to finance its remaining acquisitions. Despite difficult credit conditions, the company obtained $353.5 million in debt financing with favorable terms.

The financing includes:
•    10-year term financing for $120.0 million, secured at 60% of original vessel values and interest at LIBOR plus 190 bps to partially finance the acquisition of two Capesize newbuildings;
•    3-year term convertible debt for $33.5 million with a coupon of 2% and a conversion price of $11.00 per share (Wednesday’s mid-day price $2.37) to partially finance the acquisition of the Navios Vega (delivered this month); and
•    2-year revolver for $200.0 million in total, with interest at LIBOR plus 275 bps to be used for general corporate purposes.

And even with this new debt in place, Navios still has the ability to return capital to its shareholders in the form of dividends and buybacks. If by chance we had any doubts, we certainly feel vindicated in nominating Ms. Frangou and her team as dealmaker of the year.
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