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We should preface this article by stating irrevocably that rumors of the demise of the high yield bond market are patently false. Fund flows have been strong and in fact during last week there was $3 billion done in 9 deals. It is alive and well. NCL and Genmar were successfully completed but First Ship Lease Trust (“FSL”) did not get done and therein lies an interesting story.
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Written by: carisk | Categories: Freshly Minted, The Week in Review | December 10th, 2009 | Add a Comment
Can’t See the Forest for the Trees
Late Friday, the news came out that General Maritime had successfully priced its 144a private placement of $300 million of senior unsecured notes due in 2017. Like the NCL deal that was competing with it, the Genmar bonds were priced in a soft and volatile stock market. Rated B3/B, the notes, with a 12% coupon, were priced at 97.512% to yield 12.5%, a spread of 922 bps over like term Treasuries.
Market noise suggested it was a hard sell, that buyers had issues with the dividend and covenants and, finally that it was expensive. But was it really? While it does look expensive when compared to the NCL and Navios’ offerings, one must not forget that this was done on an unsecured basis. And, although the premium for unsecured was perhaps higher than they anticipated, the company got what it wanted – quasi-equity. The bond provides the cushion that the banks were looking for. And while the $36 million in interest cost is expensive, the impact of that amount, if it had instead been income, appears less costly on an EPS basis based upon a new hypothetical share count (currently 57.9 million shares) which would have included an incremental +/- 33 million shares at $7, that would have had to been issued to meet the minimum requirement of its banks.
Written by: carisk | Categories: Freshly Minted, The Week in Review | November 12th, 2009 | Add a Comment
Star Cruises to List NCL?
Rumor has it that Star Cruises is looking to list subsidiary NCL to raise as much as $250 million, though the company denies that it has plans to do this by the yearend. If the deal does materialize, we expect that JP Morgan, who has raised immeasurable amounts of capital at very key times for the company, will probably be the underwriter.
New York Conference Features Shipping Star Power
New York Conference Features Shipping Star Power
Last week’s Hellenic-/Norwegian-American Chambers of Commerce Joint Shipping Conference offered a plethora of luminaries from shipping’s universe. Between OSG’s Morten Arntzen, Teekay’s Sean Day, GenMar’s Peter Georgiopoulos, Tidewater’s Dean Taylor, NCL’s Colin Veitch, BP’s Bob Malone, Heidmar’s Per Heidenreich, Wilh. Wilhelmsen, Leif Hoegh, Navios’ Robert Shaw, Intrepid Shipping’s Richard du Moulin, Free Bulkers George Gourdomichalis, CR Weber’s Basil Mavroleon, Healy & Baillie’s Glen Oxton, and DNV’s Tor Svensen the bulk of the world’s tonnage was well represented.
The theme of the conference was “Shipping without Borders” which transcended from national identity to the impact of new technologies and landed squarely on the challenges of doing business in America. Or should we say the many challenges of doing business in the (50) States?
Per Heidenreich welcomed the assembled with the observation that “2004 was the most incredible shipping market in history, with Wall Street showing an alarming interest in shipping”. He reflected that the Norwegians are “awfully quiet” and urged them to learn what “makes the Greeks tick.”
The Greek contingent was happy to comply, with George Gourdomichalis offering the strengths of the Greek approach: Piraeus as a maritime cluster, a favorable tax climate, and the transition of Greek family-owned operations to corporations. As a counterpoint, Leif Hoegh underscored the decline in Norwegian shipping, both in the bulk and tanker trades as well as in the yard order book. He further advocated the Greek regard for shipping: “When you go to Piraeus, even the taxi drivers know about tankers. Piraeus is an exhilarating place!” When pressed as to whether the Leif Hoegh company would return to Norway, Mr. Hoegh’s one-word answer was a resounding “No”.
While acknowledging the decline of Norway’s shipping sector, Marianne Lie, Director General of the Norwegian Shipowners’ Association, presented the proposed tax and legislative changes within Norway designed to reinvigorate its maritime industry. The key word is “proposed”. Tor Svensen of DNV attempted to breach the gap by offering the concept of geographic co-location, while Anthony Argyropoulos, newly at Cantor Fitzgerald, adroitly attributed the Greek interest in the capital markets to their entrepreneurial spirit, without discouraging Norwegian interest.
After an overview of the freight futures market by Robert Shaw of Navios, technological advances in this field were covered by Basil Mavroleon of CR Weber, who helped transition the conference by eliminating borders entirely. In his call to action on FFA’s (Forward Freight Agreements), Basil reflected “If, as I believe it will, this market continues to strengthen, who, with underlying physical positions can continue to ignore participation in it – surely we must all find a way to engage with it, learn to utilize it to our benefit and play some part in the growth curve”. Implementation was discussed by Barry Bednar of J. Aron & Company and Tom Even Mortensen of IMAREX.
Wilhelm Wilhelmsen offered a global perspective as the conference’s luncheon keynote speaker. His answer to whether national identity has become irrelevant was a conditional “Yes”. Despite being Norway’s oldest and largest shipping enterprise, only 5% of the company’s employees have Norwegian as their mother tongue, and only a handful of ship calls handled by the company last year were in Norway. He feels that the shipping industry is “almost unwanted by the Norwegian authorities…many (companies) feel strongly that they are literally being kicked out.” Norway is the only major shipping nation that is in decline, with the government “destroying an industry which actually has everything required to ensure good and stable revenues for my country in the future.”
Turning the focus to doing business in the Americas, Sean Day of Teekay pointed to the industry’s image in the financial markets resulting in investor differentiation, and a greater scrutiny on quality of both fleets and management. Mr. Day declared Sarbanes-Oxley a “time sink” and expensive, while acknowledging that Teekay is a foreign filer that complies with US requirements.
Bob Malone of BP Shipping stated that his company’s strategy is to own ships in order to manage risk (against incidents). He felt the need to regain the public trust by managing the company, and pointed to the benefits gained through compliance with Sarbanes-Oxley.
Peter Georgiopoulos of GenMar struck a profoundly wistful note, reflecting that he used to think shipping connoted yachts, former US President’s wives and opera singers, but quickly learned that the world of shipping revolves around OPA, ISM and SARBOX. Regulation is making shipping increasingly expensive, and much less desirable.
OSG’s Morten Arntzen lifted everyone’s mood with his list of “Top Ten Challenges Facing Executives of American Shipping Companies Competing Internationally” (including finding an affordable Starbucks coffee in Europe, explaining why a suezmax built in the United States costs $240 million, and repeating “Foreign Corrupt Practices Act” 10 times). Mr. Arntzen demonstrated to the market doomsayers why the tanker industry of today is dramatically different from that of the early 70’s. He further went on to tout the merits of Sarbanes-Oxley as a significant management tool, and highlighted the benefits accruing to OSG from the recent Job Creation Act of 2004, with its attendant tonnage tax scheme for US-flag shipping.
Dean Taylor of Tidewater reiterated the challenges of doing business in the US amidst extensive and expensive regulation. Mr. Taylor’s remarks were surprisingly dour, considering the profitable condition of Tidewater and their enviable earnings multiple.
Norwegian Cruise Line’s Colin Veitch delivered an overview of how, and why, they decided to pursue a US-flag strategy despite the costs and challenges. Interestingly, it was Mr. Veitch who called upon industry to be proactive, rather than reactive, about regulation (such as environmental policies). With his extensive experience in the public sector, perhaps his suggestion to influence perception could inspire action leading to a positive image for shipping??
Last week’s Hellenic-/Norwegian-American Chambers of Commerce Joint Shipping Conference offered a plethora of luminaries from shipping’s universe. Between OSG’s Morten Arntzen, Teekay’s Sean Day, GenMar’s Peter Georgiopoulos, Tidewater’s Dean Taylor, NCL’s Colin Veitch, BP’s Bob Malone, Heidmar’s Per Heidenreich, Wilh. Wilhelmsen, Leif Hoegh, Navios’ Robert Shaw, Intrepid Shipping’s Richard du Moulin, Free Bulkers George Gourdomichalis, CR Weber’s Basil Mavroleon, Healy & Baillie’s Glen Oxton, and DNV’s Tor Svensen the bulk of the world’s tonnage was well represented.
The theme of the conference was “Shipping without Borders” which transcended from national identity to the impact of new technologies and landed squarely on the challenges of doing business in America. Or should we say the many challenges of doing business in the (50) States?
Per Heidenreich welcomed the assembled with the observation that “2004 was the most incredible shipping market in history, with Wall Street showing an alarming interest in shipping”. He reflected that the Norwegians are “awfully quiet” and urged them to learn what “makes the Greeks tick.”
The Greek contingent was happy to comply, with George Gourdomichalis offering the strengths of the Greek approach: Piraeus as a maritime cluster, a favorable tax climate, and the transition of Greek family-owned operations to corporations. As a counterpoint, Leif Hoegh underscored the decline in Norwegian shipping, both in the bulk and tanker trades as well as in the yard order book. He further advocated the Greek regard for shipping: “When you go to Piraeus, even the taxi drivers know about tankers. Piraeus is an exhilarating place!” When pressed as to whether the Leif Hoegh company would return to Norway, Mr. Hoegh’s one-word answer was a resounding “No”.
While acknowledging the decline of Norway’s shipping sector, Marianne Lie, Director General of the Norwegian Shipowners’ Association, presented the proposed tax and legislative changes within Norway designed to reinvigorate its maritime industry. The key word is “proposed”. Tor Svensen of DNV attempted to breach the gap by offering the concept of geographic co-location, while Anthony Argyropoulos, newly at Cantor Fitzgerald, adroitly attributed the Greek interest in the capital markets to their entrepreneurial spirit, without discouraging Norwegian interest.
After an overview of the freight futures market by Robert Shaw of Navios, technological advances in this field were covered by Basil Mavroleon of CR Weber, who helped transition the conference by eliminating borders entirely. In his call to action on FFA’s (Forward Freight Agreements), Basil reflected “If, as I believe it will, this market continues to strengthen, who, with underlying physical positions can continue to ignore participation in it – surely we must all find a way to engage with it, learn to utilize it to our benefit and play some part in the growth curve”. Implementation was discussed by Barry Bednar of J. Aron & Company and Tom Even Mortensen of IMAREX.
Wilhelm Wilhelmsen offered a global perspective as the conference’s luncheon keynote speaker. His answer to whether national identity has become irrelevant was a conditional “Yes”. Despite being Norway’s oldest and largest shipping enterprise, only 5% of the company’s employees have Norwegian as their mother tongue, and only a handful of ship calls handled by the company last year were in Norway. He feels that the shipping industry is “almost unwanted by the Norwegian authorities…many (companies) feel strongly that they are literally being kicked out.” Norway is the only major shipping nation that is in decline, with the government “destroying an industry which actually has everything required to ensure good and stable revenues for my country in the future.”
Turning the focus to doing business in the Americas, Sean Day of Teekay pointed to the industry’s image in the financial markets resulting in investor differentiation, and a greater scrutiny on quality of both fleets and management. Mr. Day declared Sarbanes-Oxley a “time sink” and expensive, while acknowledging that Teekay is a foreign filer that complies with US requirements.
Bob Malone of BP Shipping stated that his company’s strategy is to own ships in order to manage risk (against incidents). He felt the need to regain the public trust by managing the company, and pointed to the benefits gained through compliance with Sarbanes-Oxley.
Peter Georgiopoulos of GenMar struck a profoundly wistful note, reflecting that he used to think shipping connoted yachts, former US President’s wives and opera singers, but quickly learned that the world of shipping revolves around OPA, ISM and SARBOX. Regulation is making shipping increasingly expensive, and much less desirable.
OSG’s Morten Arntzen lifted everyone’s mood with his list of “Top Ten Challenges Facing Executives of American Shipping Companies Competing Internationally” (including finding an affordable Starbucks coffee in Europe, explaining why a suezmax built in the United States costs $240 million, and repeating “Foreign Corrupt Practices Act” 10 times). Mr. Arntzen demonstrated to the market doomsayers why the tanker industry of today is dramatically different from that of the early 70’s. He further went on to tout the merits of Sarbanes-Oxley as a significant management tool, and highlighted the benefits accruing to OSG from the recent Job Creation Act of 2004, with its attendant tonnage tax scheme for US-flag shipping.
Dean Taylor of Tidewater reiterated the challenges of doing business in the US amidst extensive and expensive regulation. Mr. Taylor’s remarks were surprisingly dour, considering the profitable condition of Tidewater and their enviable earnings multiple.
Norwegian Cruise Line’s Colin Veitch delivered an overview of how, and why, they decided to pursue a US-flag strategy despite the costs and challenges. Interestingly, it was Mr. Veitch who called upon industry to be proactive, rather than reactive, about regulation (such as environmental policies). With his extensive experience in the public sector, perhaps his suggestion to influence perception could inspire action leading to a positive image for shipping??
Tropical JP Morgan High Yield Conference Attracts Snowbirds
Tropical JP Morgan High Yield Conference Attracts Snowbirds
JP Morgan hosted a phenomenally well-attended high yield conference at the Lowe’s Hotel on sultry South Beach in Miami Florida last week. Among the 300 hundred companies that presented at the enormous event were faithful JP Morgan shipping clients NCL, Stena and General Maritime – the former two of which issued bonds in 2004. Although most shipowners have been selling equity due to where we are in the cycle, the high yield market remains incredibly receptive to new issuers and should not be overlooked.
JP Morgan hosted a phenomenally well-attended high yield conference at the Lowe’s Hotel on sultry South Beach in Miami Florida last week. Among the 300 hundred companies that presented at the enormous event were faithful JP Morgan shipping clients NCL, Stena and General Maritime – the former two of which issued bonds in 2004. Although most shipowners have been selling equity due to where we are in the cycle, the high yield market remains incredibly receptive to new issuers and should not be overlooked.
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