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SinOceanic on the Road
At the beginning of last week, SinOceanic Shipping ASA began marketing its new senior secured bond offering. The bonds were to be issued by Sin Oceanic II AS and SinOceanic III AS, the single purpose ship owners and guaranteed by parent SinOceanic Shipping in order to provide a ring-fenced structure. The company intended to sell $200 to $220 million of 3-year 10% bonds at par. Proceeds, split 50-50, will be used to finance pre- and post-delivery payments owed to the shipyard for the construction of the MSC Altair and MSC Regulus, two newbuild 13,100 TEU containerships scheduled for delivery in February and April. The total amount represents an advance rate of 65-70% of the vessels’ acquisition price of ~$154 million. Equity of approximately $50-$60 million consists largely of subordinated loans from HNA Group Co. Ltd, the parent company, while they wait for the equity markets to reopen. These 2nd mortgage loans have a tenor of three years and are interest only. The interest rate steps-up increasing from LIBOR + 8% in year one to LIBOR + 10% thereafter. To date, HNA has invested $120 million into the business and has a 33% interest.
Let It Pour! – The Window is Open
At least with respect to the shipping/offshore finance world, Oslo, for the moment, is the center of the universe. Since our move into publishing, approximately six years ago, we have never encountered the volume of deals derived from a single source in such a short period. Beginning with Teekay Offshore’s offering on January 16th, the Norwegian bond market has successfully concluded six transactions in the offshore space and has at least two deals including one shipping deal pending. Total volume concluded was NOK 4,450 million equating to approximately $760 million, making it a very successful two weeks. All were floating rate, senior unsecured notes priced in NOK. And not surprisingly, given the currency, the interest came largely from Nordic investors. Moreover, we understand that there are more deals in the pipeline. It should continue to be a very interesting month. We begin our coverage chronologically.
“That Was Easy” – Prosafe Issues NOK 500 million Bond
As a regular issuer, Prosafe SE knows the ropes, which was evident with the elapsed time between the announced offering and the closing of the books a mere hour and a half. Then too it’s a niche business in oilfield services making it an easy sell these days. In a substantially oversubscribed offering, Prosafe sold NOK 500 million of 5-year senior unsecured bonds. The bonds, sold at par, were priced at NIBOR +3.75%. In connection with the offering, the company bought back NOK 121 million of PRS06 PRO, which bonds mature on October 14, 2013, at 102.87%. At the end of December, those bonds were trading at 101.47%. The remaining proceeds will be used for general corporate purposes. More details on the transaction are included in the Guts of the Deal below.
New Sevan Successfully Places Shares
On Monday, Sevan Marine ASA announced that its offering and listing of up to 21,037,428 shares was fully subscribed. At an offering price of NOK 6.70/share gross proceeds raised were NOK 149,950,768 or approximately $25 million. Proceeds of the offering will be used for near term liquidity and general corporate purposes.
Part of the restructuring of the company, these shares were directed to former shareholders of Sevan and the unsecured bondholders who received unsecured bondholder shares in the unsecured debt conversion. This offering also provides for the listing of the directed placement of 21,047,276 new shares towards an affiliate of Teekay Corporation for NOK 141 million and the 5,261,595 new shares already issued pursuant to a conversion of the 14% Sevan Callable Senior Unsecured Bond Issue 2010/2014.
Aban Offshore Taps High Yield Bonds for Refinancing
Even as the year comes to a close, companies are busy strengthening their balance sheets and ensuring there is sufficient capital to ride through the uncertainties lying ahead. With banks tightening their lending requirements and some reducing their shipping exposure or exiting from the industry, the “Norwegian” high yield market continues to offer oil service, drilling, E&P and shipping companies fund raising opportunities amid challenging times. To the issuers, the attractiveness of the KS model lies in its fast and flexible issuance process, and ability to tap into pools of investors with in depth understanding of markets.
Last Wednesday, Aban Offshore Limited’s Singapore subsidiary Deep Drilling 1 Pte. Ltd had successfully raised USD 125 million four year senior secured bonds with sole manager Pareto Securities. A number of features make this deal attractive to investors, beginning with a good asset in a highly favorable market. The proceeds will be used to refinance existing bonds maturing 19 January 2012, previously issued to acquire 2006 Singapore built jack-up rig, Deep Driller 1. Continue Reading
For Visibility & Liquidity, Pacific Drilling Comes to NY
On November 7th, Pacific Drilling S.A., a company controlled by the Ofer family through Quantum Pacific Group, announced an initial public offering of six million of its shares, which will be traded on the New York Stock Exchange. Previously in April 2011, the company completed an offering of 60 million shares to qualified international and U.S. investors In accordance with Regulations S and D under the Securities Act of 1933. These shares currently trade on the Norwegian OTC List. Following the completion of the IPO, 41.85 million of these shares sold pursuant to Regulation S may be re-sold immediately in the U.S. market creating a substantial overhang. Post-offering, Quantum Pacific will own 150 million shares representing 69.4% of the total outstanding shares.
Songa Bond – Offshore Services Has the Ticket to Norwegian Bond Market
Last week, Songa Offshore SE successfully concluded a five year senior unsecured bond issue of NOK 1,400 million, at the high end of the proposed range. Led by First Securities, Nordea Markets and Pareto Securities, the offering was priced at par with a floating rate of six month NIBOR + 10%. With the impetus from a commitment in excess of the minimum amount underwritten by a consortium of investors, the deal was oversubscribed and sold mainly to institutional investors. Although the deal saw demand from the US and UK, the deal was largely placed in the Nordic market, which demand has proved vital in most sizeable deals in the Norwegian market this year. Proceeds of the offering will be used for general corporate purposes, including the initial installment of $113 million on the 2nd Cat-D rig. The company used a credit facility to finance the initial payment on the first rig. See the Guts of the Deal below for more details on the terms of the financing.
Established in 2005, Songa operates an aging fleet of 5 mid-water semi-submersibles to which they have recently added the Songa Eclipse, a new UDW semi-submersible delivered in August and on contract to Total for 18 months. While the average age of the on the water fleet is 25 years, this does not take into account the multiple upgrades to the rigs the company has undertaken, most of which occurred in the last seven years. And while the rigs may be perceived as old they have performed ably with an average quarterly fleet utilization of 93% since 2007. The majority of the rigs are contracted long-term with a total contract backlog of $4.45 billion. According to Nordea’s estimates, annual contract revenue for the balance of 2011 is 100%, 87% in 2012 and 65% in 2013. Counterparty risk is low as the rigs are contracted to major oil companies. Lastly, reflecting the capital intensive nature of the business, the company’s financial risk profile is somewhat aggressive, according to Nadia Bendriss of Nordea who points to net debt/EBITDA of 2.4x, FFO/debt of 26% and EBITDA/interest coverage of 6.4x. On the other hand, the company has improved its debt maturities and liquidity with the addition of the new 8.5 year $420 million facility as well as the $100 million facility.
Archer Finances Great White Energy Services Acquisition
Last month, Archer Limited agreed to acquire Great White Energy Services (“GWES”), a company which provides horizontal and directional drilling services, pressure control and pressure pumping for $742 million. The acquisition gives Archer an entry point into the rapidly expanding “frac” market in the US as well as effectively doubling Archer’s US coil tubing and directional drilling capacity.
Soon thereafter, the financial markets collapsed and the company renegotiated the purchase price with the seller obtaining a price reduction of $112 million to $630 million. Initially, the company planned to issue 12.7 million new shares at a price of NOK 35 in a private placement directed towards its two largest shareholders, Seadrill Limited and Lime Rock Partners V.L.P to partially finance the purchase. The offering would have raised $82 million in proceeds to Archer. In fact, due to increased demand the offering was oversubscribed with the company issuing 30 million shares at NOK 30 raising gross proceeds of NOK 900 million. Allocated 14.5 million shares, Seadrill will own approximately 145.8 million shares corresponding to a 39.81% of the issued and outstanding shares.
A Move to Simplicity – Havila Shipping ASA Consolidates Interests
As part of a proposed acquisition to acquire five modern PSVs, Havila Shipping ASA announced earlier this month the successful completion of a private placement to Norwegian professional investors, international investors and US 144A QIBs of 3.77 million shares at a price of NOK 52.50/share raising approximately NOK 198 million. Of the total number of shares 2.56 million are new or primary shares with the balance of 1.21 million shares sold by the company. Both the share price, set through a book building process, and equity raised were at the low end of expectations. For more detail, see the Guts of the Deal below.
Asian Offshore & Energy Companies Attracted to Norwegian Capital Markets
Over the past two months, at least three Asia based offshore & energy companies have tapped the Norwegian capital markets. Jasper Explorer, a wholly owned subsidiary of Singapore listed Jasper Investments, raised USD 165 million successfully in secured bonds in May, Asia Offshore Drilling (“AOD”) completed its USD 80 million private share placement this month and this week KrisEnergy, a Singapore based E&P company with First Reserve as the majority owner, raised USD 85 million in a senior secured bond issue. Our sister publication Freshly Minted has provided excellent coverage on the Jasper and AOD transactions and the guts of the deal tables are provided below.
One common thread in the transactions was the role of Pareto Securities as the Sole Lead or Joint Lead Manager. The Norwegian investment bank has been actively involved in a number of equity and debt placements of over USD 4 billion over the last six months. Continue Reading
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