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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:
A Large Weight Lifted – Genmar Sale-leaseback
What began last quarter as an attempt by General Maritime (“Genmar”) to sell a VLCC to meet the terms of its $22.8 million bridge loan from DnB NOR and Nordea, ended this week with a sale of three unencumbered MR product tankers from the former Arlington fleet to affiliates of Northern Shipping Funds (“NSF”) with a concurrent charter-back. NSF is a leading alternative capital provider focusing on equity investments in the shipping and offshore oil service sectors.
And the Winner is….the Syndication Market
Last quarter, we went out on a limb, a pretty sturdy one we must confess, and called a turn in the downward trend in the syndication market, based upon a 9.8% increase in volume. Thankfully, we were correct, but the result was unexpected. According to Dealogic, for the twelve months ending in 2010, total syndicated shipping volume was $50.06 billion, an increase of 53.2% over 2009. The ancillary data provided by Dealogic strongly supports this revival, as well as an improving credit environment. As shown below, new money raised nearly doubled from the prior year but what is more significant is that it represented ~76% of new volume whereas in the prior year it was only 59%. The dollar amount of club deals was virtually unchanged, which had the effect of reducing the percentage of club deals as a portion of total volume from 42% in 2009 to approximately 30% in 2010. These trends can be seen in the enclosed graphs.
And the Winner is….the Syndication Market
Last quarter, we went out on a limb, a pretty sturdy one we must confess, and called a turn in the downward trend in the syndication market, based upon a 9.8% increase in volume. Thankfully, we were correct, but the result was unexpected. According to Dealogic, for the twelve months ending in 2010, total syndicated shipping volume was $50.06 billion, an increase of 53.2% over 2009. The ancillary data provided by Dealogic strongly supports this revival, as well as an improving credit environment. As shown below, new money raised nearly doubled from the prior year but what is more significant is that it represented ~76% of new volume whereas in the prior year it was only 59%. The dollar amount of club deals was virtually unchanged, which had the effect of reducing the percentage of club deals as a portion of total volume from 42% in 2009 to approximately 30% in 2010. These trends can be seen in the enclosed graphs.
APM Goes Back to the Bond Market
Having had its first taste last year, A.P. Moller-Maersk (“APM”) returned to the public bond market a couple of weeks ago, issuing EUR 500 million of 7-year bonds with a coupon of 4.375%. The net proceeds will be used for general corporate purposes. Unsurprisingly, investor interest was strong with the bonds being more than three times oversubscribed. As a point of comparison, last year’s issue of EUR 750 million 5-year bonds carried a coupon of 4.875%. Placed by Barclays Capital, BNP Paribas, Danske Bank, HSBC and RBS, the bonds will be listed on the Luxembourg Stock Exchange.
DOF Subsea Finalizes
Earlier this month, DOF Subsea tested investor appetite by circulating a preliminary term sheet for a senior unsecured open bond issue, which we covered in detail in our October 7th issue. The company was looking to raise a minimum of NOK 650 million and closed the books when offers of NOK 750 million were received.
Serial Convertible Issuer – Seadrill Again
When it comes to financing his offshore drilling company, Mr. Fredriksen likes convertible bonds. With two issues already in place, $1 billion due in 2012 and $500 million in 2014, Seadrill Limited last week sold $650 million of senior unsecured convertible bonds. The original offering size was $550 million with an increase option of $100 million, which was exercised. As a large and regular seller of this financial instrument, which is particularly attractive to hedge funds, the company’s offer attracted strong demand and was oversubscribed within hours. Market talk indicates that there was sufficient interest at the $950 million level. Buyers included the usual investors interested in the offshore industry as well as a number of large buyers not typically found in the sector.
Who Wants to Call the Turn?
We might. While the data may be considered slim and possibly distorted by the $6.75 billion A.P Moller-Maersk transaction, the nine-month 2010 Dealogic shipping data intimates a reversal in the downward trend in syndicated lending which began in 2007. Not only were the number of syndicated deals, volume and new money higher, club deal volume and numbers were down. The latter of course might just reflect deal size, where five of the top fifteen deals were in excess of $1 billion, but we will give the data the benefit of the doubt. In terms of specifics, the number and volume of deals for the 9-months of 2010 was 110 deals totaling $28.4 billion versus the one year earlier total of 90 deals totaling $25.9 billion. The best way to see the trend over time is to look at the data, which we show pictorially below. And, yes, you needn’t remind us that one point does not make a trend.
Testing the Waters – Preliminary Marketing of DOF Subsea Bond Issue
With joint managers, Arctic Securities, First Securities, Nordea and Pareto leading the process, DOF Subsea, which is indirectly owned by DOF ASA (51%) and energy focused private equity firm, First Reserve (49%), began marketing a senior unsecured bond issue consisting of floating and fixed rate tranches. Indicative terms for the offering assume a maximum amount of NOK 1,000 million with a minimum of NOK 650 million with a tenor of 3.5 years. Pricing on the FRN is proposed at 3-month NIBOR + 650 to 700 bps with the coupon on the fixed rate at 9.80% to 10.30%. Proceeds will be used to refinance the NOK 500 million outstanding under DOFSUB01 due March 2011 with the excess for general corporate purposes. The Guts of the Deal for this transaction also contained herein provides a closer look at the terms.
Knightsbridge Follows-on and Continues Diversification
On Monday, Knightsbridge Tankers announced an underwritten public offering of 4.25 million shares, offered pursuant to the company’s effective shelf registration. The shares were priced Wednesday after the market closed at $19 per share, a 12.7% discount from the closing price of the shares the day preceding the announcement. The discount largely reflects the current volatility of the markets.
Proceeds of the offering will be used to repay existing indebtedness, fund a portion of the purchase price of a newbuilding Capesize bulker that the Company has agreed to purchase from Golden Ocean Group Limited, with the balance expected to be used to fund future vessel acquisitions, for working capital and for general corporate purposes.
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