“Gone in 60 Seconds”

Like the movie highlighted in the title, it comes as no surprise that people work better under pressure. Last week’s $225 million convertible bond offering by Frontline Ltd. evidences that fact. In a matter of two days, Frontline’s bankers, led by joint book-runners ABG Sundal Collier and Deutsche Bank, successfully structured and executed the company’s debut convertible bond issue. And when it came to market, the transaction was fully covered within 1.5 hours and priced within 3 hours of launch. With strong demand across a broad spectrum of investors and geographies, the deal was upsized from the originals $200 million to $225 million.
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Songa’s Misguided Misadventure

In a presentation on Monday, Songa Offshore sought to explain its unexpected private placement of shares the previous week, at a discount of approximately 34% to the prior day’s close. The share placement alleviated a short-term liquidity shortfall as well as a breach of covenants.

The main culprit was its historic financial strategy. Over the last few years, Songa intentionally kept cash at tight levels of around $30 to $70 million, which level was increased as rigs were added. In addition, the company entered into TRS agreements during the 12-month period until January 2008.  Both worked as planned until worlds collided. In a matter of five weeks, the company’s TRSs went from $16.7 million in the money to $26.8 million out of the money a swing of $43.5 million. In addition, during the week of September 15th, Songa expected to rollover $50 million in commercial paper and was able only to roll only $22 million leaving a $28 million shortfall.

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