OCBC Provides Mezzanine to GO OFFSHORE

GO Offshore, Otto Marine and OCBC Bank have entered into indicative term sheet for a mezzanine loan of up to USD 20 million by OCBC with an option for OCBC to subscribe for new ordinary shares in GO Offshore or its listing vehicle for up to the facility amount. GO Offshore is a wholly-owned subsidiary of GO Marine Group, a company in which Otto Marine has a 19% shareholding and an option to acquire a further 81% shareholding.

Under the term sheet, the mezzanine loan will be repayable by GO Offshore at the earlier of (a) 36 months from the first drawdown date or (b) the occurrence of a “liquidity event”. A “liquidity event” includes an initial public offering by GO Offshore or its listing vehicle and the sale or transfer of all or substantially all the assets of GO Offshore. The facility will commence on the date of the definitive facility agreement to be entered into between GO Marine and OCBC and will expire 36 months from the first drawdown date. Continue Reading

Notes in Demand

Singapore listed marine services provider Ezra Holdings is raising new debt with the advice of DBS and HSBC. The three year USD 100 million unsecured guaranteed financing will comprise fixed rate notes and a transferable term loan facility. What is a transferable term loan? Simply put, it is a bank loan facility that can be traded between lenders. According to the Law of Multi-banking Financing: Syndications and Participations published by Agasha Mugasha, transferable term loan is a form of securitization that allows banks to trade loan assets, with the objective to improve the liquidity of the transferor banks and diversify lending risks.  

No details on the actual split between the two arrangements have been announced but marketing for the notes has commenced on Tuesday, with the institutional investors largely in mind. Proceeds will be used to finance new business opportunities and capital expenditure, possibly to fund the acquisition of the Crusader 2, an ice class DP3 well-intervention vessel. Continue Reading

Otto Marine Establishes MTN

Last Tuesday, Singapore listed Otto Marine established a SGD 500 million (USD 364.6 million) multicurrency term note (“MTN”) programme with arranger Standard Chartered Bank. This gives the shipbuilder the flexibility to issue notes from time to time in series or tranches in any currency as may be agreed between the arranger and the issuer. Each series of notes may also be issued in various amounts and tenors, and may bear fixed, floating or variable rates of interest. The notes will be unconditional, unsecured and unsubordinated and shall at all times rank pari passu with all other present and future unsecured obligations of the company.

To the issuers and investors, the main advantage that MTN has over bonds would be the flexibility of its structure and documentation. In other words, the issuer can potentially pay investors a lower yield by customising the notes in accordance with the features they demand. The issuer can likewise match the terms of the offering with its liabilities and ensure a smoother operating cash flow. The flexibility of MTNs also allows the issuer to take advantage of temporary market opportunities, since a new MTN with specific characteristics can be issued quickly. Continue Reading

Different Means, Same End

There are a number of similarities between Marco Polo Marine and Otto Marine. Both are Singapore listed and have their ship chartering and shipbuilding businesses focused on tugboats and barges. Coincidentally, both revealed plans to raise more capital in the past two weeks, but in different ways.

Last Wednesday, Marco Polo Marine announced its disposal of 8 vessels to a related party on a sale-and-leaseback arrangement for SGD 11.9 million (USD 8.48 million). The company explained that this arrangement would serve two purposes. Firstly, this reduces the company’s gearing level and improves cash flow while maintaining the fleet size without the loss of commercial and operational control. Secondly, this circumvents the restriction faced by company in operating Indonesian flagged vessels. The company is not allowed to own Indonesian flagged vessels (since only Indonesians can do so) and the sale-and-leaseback arrangement will enable the company to operate Indonesian flagged vessels freely in Indonesian waters. Continue Reading

The Importance of Self Preservation

In 2009, the equity markets had a roller coaster run, but some shipping companies found windows of opportunity for share placements, often tied to debt reduction. Self help through raising equity capital for balance sheet recapitalization is one way to ride through the difficult times. There had been varying degrees of success and among the most notable would be Neptune Oriental Lines’ (“NOL”) USD 972 million rights issue in June and NYK’s recently concluded JPY 116.4 billion (USD 1.3 billion) global equity offering. Continue Reading

Reflect Joins Otto

What would you do if you owned a start up company specialising in seismic and geophysical services and looking for more capital for expansion? Debt and private equity might first come to mind, but Pareto Securities has found an interesting funding solution by linking Reflect Geophysical (“Reflect”) with another strategic player, Singapore based offshore marine group Otto Marine.

Reflect is a start-up company incorporated in Singapore in 2008, founded by eight industry experts with combined experience of over 350 years in the marine seismic sector. Otto Marine on the other hand owns a spectrum of businesses ranging from shipbuilding, ship chartering and ship repairing and more importantly, has SGD 115 million in its pockets from its rights issue concluded in the third quarter this year. Reflect would be an exciting opportunity for Otto Marine to move upstream into high value oil and gas services, considering that there are not many such companies involved in the seismic industry in this part of the world. We note that Otto Marine has been actively expanding its business through joint ventures and acquisitions. Till date, it has forged strategic partnerships with ABCmaritime AG, Aries Offshore, GC Rieber Shipping ASA and Go Offshore Australia to leverage on its partners’ expertise and global networks and in the process hoping to build up a source of passive and recurring income. Continue Reading