Marrying the Bankers’ Greatest Nightmare with the Advisors’ Dream – Omega Navigation Files Chapter 11

Last Friday, after the markets closed, Omega Navigation Enterprises Inc. announced that it along with certain subsidiaries had filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The filing seeks protection for the publicly listed company and all of its 100% owned vessel owning companies. Excluded from the filing is the company’s technical vessel manager, Omega Management, Inc. as well as two subsidiaries which hold part interests in five on the water vessels and two newbuildings under construction.

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Too Early to Tell

A quarter does not make a year, but it’s off to a good start. Dealogic’s latest league tables arrived last week in the new format implemented in Q4 2010, which provides totals for syndicated marine finance loans and then breaks them down into their constituents, shipping and offshore service loans. This is in line with the Norwegian lending focus, disadvantaging pure shipping banks, although these we would guess are few and far between these days, as diversification is a key risk management tool. Data, for this period, is broken down and provided for all three categories, whereas for the last quarter only offshore was broken out. We have come around to this way of thinking and will focus mainly on the totals rather than the individual sectors, although we will mine the latter for interesting data when it appears.

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BLT Receives Backing from 6 Banks

From its humble beginnings as a small local Indonesian tanker operator, BLT’s successful listing in Singapore was catalytic to its transformation into one of the largest chemical tanker owners in the world. Its Singapore listing in 2006 shrewdly placed the company on the radar screens of many shipping banks in the city state, who have shown strong support of its expansion plans both domestically and internationally, despite industry watchers’ concerns that the company could be overly leveraged in pursuit of growth.

On Monday, Singapore listed owner Berlian Laju Tanker (“BLT Tanker”) announced the completion of the largest term facility it has ever completed. Six commercial banks, DnB NOR Bank, Nordea Bank, Standard Chartered, ING, NIBC and BNP Paribas have all committed to provide BLT Tanker USD 685 million in a new landmark term facility. DnB NOR is the Facility Agent and Security Trustee. Continue Reading

Bank Debt Returns to Normalcy?

One of the major concerns on the minds of many would be the pile of toxic collateralized mortgage paper that remains on banks’ balance sheets and this will continue to restrict the banks’ ability to extend new credit. Likewise, shipping banks face the same tricky task of valuing the shipping assets on their books based on current market prices. Basel II requires banks to set aside more capital to riskier assets whenever the security cover reduces, and this could potentially limit capital for lending. The process of writing down book values has yet taken place and moving forward, it is absolutely crucial that bank losses on shipping remain limited or the industry could risk losing a number of lenders. There has already been a material contraction in ship lending capacity among major shipping banks.

2009 has been a busy year for the ship financiers, not so much for lending but more in terms of restructuring and workouts. Lending terms as one would expect have become more stringent in 2009 and not only has the advance rate been lowered to 50-60%, banks prefer shorter tenors between 3 and 5 years. This is in stark contrast to the 10 to 12 year tenors banks were offering shipowners during the shipping boom just a couple of years back. Bankers call this a return to basics. Continue Reading

Watson, Farley & Williams LLP Advises in High Profile KOGAS Project Financing

The Singapore office of Watson, Farley & Williams LLP (“WFW”) advised on the high profile Korea Gas Corporation (“KOGAS”) refinancing for three 1999 built LNG carriers.  The 138,200 cbm built LNG carrier “Hanjin Muscat” is on bareboat charter to Hanjin Shipping Co., Ltd, the 138,100 cbm built LNG carrier “SK Summit” is on bareboat charter to SK Shipping Co., Ltd. and the 135,000 cbm built LNG carrier “Hyundai Technopia” is on bareboat charter to Hyundai Merchant Marine Co., Ltd.  All three LNG carriers are operating under long term contracts of affreightment with KOGAS. Continue Reading

Fun Raising Continues

As economists struggle to reach a consensus on whether the global economy has indeed begun a sustainable recovery or this is simply a slower pace of contraction, investors are just befuddled by the strength and endurance of the present stock market rally. But one thing is for sure, shipping companies are wasting no time in taking advantage of this broad-based improvement in market sentiment.

In Japan, Mitsui O.S.K. Lines (“MOL”) issued two series of secured straight bonds – bonds number 11 and bonds number 12 last week and raised over JPY 50 billion (USD 528 million). The first tranche of five year JPY 30 billion bonds carries an annual coupon of 1.278% while the second ten year JPY 20 billion tranche pays investors 1.999% annually. The funds will be used to repay existing borrowings and for the redemption of commercial paper. Both Rating & Investment Information and Japan Credit Rating Agency have assigned AA- to the bonds, acknowledging that the company’s well diversified earnings have a strong capacity to recover in a market turnaround. The bonds, although unsecured, come with a negative pledge. At the same time, the company is said to be in the market for a three year JPY 15 billion (USD 156 million) loan with SMBC as the sole bookrunner. The loan is priced at 30 bp over 6-month TIBOR (Tokyo Interbank Offered Rate). MOL expects some signs of recovery in summer this year and is implementing its JPY 40 billion group-wide cost reduction measures to secure stable long term profits. The ability to secure incredibly low cost funding and execute rapid fleet reduction will prove to be critical for the company emerge stronger in face of the crisis. Continue Reading

Energy Infrastructure Shareholders to Opine on Vanship

Following quickly on the heels of Seanergy’s proposed special meeting to vote on its acquisition, Energy Infrastructure Acquisition Corp. (“EII”), another blank check company, set July 17 for its special shareholder meeting. As was done last week in the case of Seanergy, we will take a close look at what the shareholders are being asked to approve.

In July 2006, EII consummated its initial public offering of 20.25 million units, each unit consisting of one share of common stock and one warrant, raising $209.25 million in net proceeds (including a portion of the green shoe). Prior to the offering, George Sagredos, the President and COO, purchased through Energy Corporation 825,398 units at the offering price resulting in gross proceeds of approximately $8.25 million.
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