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Like the Energizer Bunny, Sevan Drilling’s IPO Keeps Going and Eventually Succeeds
In early April, Sevan Drilling ASA, a wholly owned subsidiary of Sevan Marine ASA (“Selling Shareholder”), announced a global offering of its shares of up to NOK 3,270 million (~$595) by way of a combined secondary offering of existing shares by the Selling Shareholder and a primary issuance of new shares. The offering would consist of an institutional offering, a retail offering to Norwegian investors and an employee offering. The share price is to be established through a book building process for the institutional offering. Based upon an expected price range of NOK 16-21 per share, the company expected a primary issue of up to 120 million new shares (~$350) and 64 million secondary shares (up to ~$245 million).
Ocean Rig’s Debt Feast – Banks and Bond Market Provide Support
It’s been a very busy and productive month for Ocean Rig UDW Inc. as it has finally fully funded its current capex program. First, the company arranged a new $800 million syndicated secured term loan facility to partially finance the construction costs of the Ocean Rig Corcovado and Ocean Rig Olympia. The facility has a five year term based upon a 12 year amortization and bears interest at LIBOR plus a margin. The facility is led by Nordea and ABN AMRO and includes in the syndicate GIEK, DVB Bank, Deutsche Bank and National Bank of Greece. A portion of the proceeds of the loan will be used to repay the $325 million bridge loan used to partially finance the Corcovado.
In addition, the company restructured its $1.1 billion secured credit facility led by Deutsche Bank which is secured by the Ocean Rig Poseidon and Ocean Rig Mykonos. The parties have agreed to reduce the maximum availability from $562 million to $495 million for each rig. Ocean Rig has also agreed to provide an unlimited recourse guarantee and will be subject to certain financial covenants. This guarantee is in addition to the existing Dryships’ guarantee. With a contract now in place, full drawdowns will be permitted for the Poseidon. For the Mykonos, the company has up to one month prior to delivery to execute an acceptable drilling contract in order to draw down on its facility.
After putting these deals to bed, the company then announced its intention to offer, through a private placement, $500 million of senior unsecured bonds in the Norwegian market. While on the roadshow, the company met some resistance from investors and had to sweeten the terms. The coupon range went from 8.25%-8.75% to 9.00%-9.50% with the call options also increasing. Year 3’s call went from 103.5% to 104.5%, while year 4’s call increased 50 bps to 102.5. The company has also undertaken to have the bonds rated by both Moodys and Standard & Poors and to list the bonds publicly on a reputable exchange.
Yesterday, DryShips announced that it had priced the $500 million of the senior secured bonds due in 2016 at 9.5%, the top end of the adjusted range. The bonds were priced at par with the proceeds to be used to fund the group’s newbuilding program and for general corporate purposes. With substantial bank debt ahead of it, these unsecured bonds had to be priced right as well as carefully structured to protect the bondholders. In addition to tight financial covenants, the company has various undertakings including a negative pledge and covenants that restrict funds flow within the group as well as dividends. More detail is provided in the Guts of the Deal attached.
Ocean Rig is a pure play ultra-deepwater driller, with a superior asset base, including two harsh environment semisubmersible drilling rigs and, by the end of the year, four premium drillships with options for four more.
In its credit analysis of the company, Nordea highlights as credit positives:
- Modern and competitive fleet of ultra-deepwater units
- Experienced deepwater driller and harsh environment operator, which has operated in 12 countries over the past nine years.
- Strong market outlook
- Modest credit profile
Credit challenges include:
- Exposure to a highly cyclical industry
- High newbuilding activity
- Limited cash flow visibility
- Significant committed capital expenditures as well as the possibility of the exercise of the options
- Risk of increased leverage.
On a preliminary basis, the company was given shadow rating of “B+” with the bonds one notch lower at “B.”
The global coordinator and lead manager was Pareto Securities and the joint lead managers were Fearnley Fonds and Nordea Markets .
Pacific Drilling’s $500 Million Private Placement
Pacific Drilling S.A. announced last week its intention to offer 50,000,000 common shares in a private placement to qualified investors. The share price is expected to range between $9.20 and $10.50, raising proceeds of approximately $500 million. The proceeds of the offering will be used to finance the Pacific Khamsin and Pacific Sharav, two new advanced capability, ultra-deepwater drillships which were contracted this month at Samsung Heavy Industries (“SHI”) for delivery in the 2nd and 3rd quarter of 2013 respectively. Similar to the four drillships previously ordered at the yard, the latest new orders are capable of drilling in water depths of 12,000 feet to a depth of 40,000 feet. The aggregate contract price for the two rigs is $1 billion, with the total cost of each vessel, including commissioning and testing and other costs, to be approximately $600 million, excluding capitalized interest.
“Every Which Way but Loose” – DnB Markets and Pareto Securities Market Structured Bond for Havila
Just when we think we have it figured out, the markets prove us wrong. Where we have believed recently that little consideration was given to structure, security and covenants, the Oslo bond market has shown us otherwise. It’s not always about yield; investors, in fact, do care. When a deal needs to be structured to deal with risk, it is.
Almost There – Aker IPO
Having successfully concluded the bond issue and secured an underwritten commitment for the refinancing of its existing bank debt with a new five year $900 million secured bank loan facility from DnB NOR, Nordea and SEB, Aker Drilling began the bookbuilding period for its IPO last week. The company is looking to raise up to NOK 3.6 billion, with the number of shares issued ranging from 189.5 million to 133.3 million depending on the price. The indicative price range is NOK 19 to NOK 27/share for the offering. Based upon the number of shares post-issue (282.5 million to 226.3 million), the shareholding of new investors would range from 58.9% to 67.1%. Finally, the post-issue market capitalization could be as low as NOK 5.4 billion to as high as $6.2 billion.
Prosafe Bonds
Last week, Prosafe SE successfully issued NOK 500 million of five-year floating rate bonds, priced at three-month NIBOR + 3.50%. The issue was substantially oversubscribed and was priced at par. Proceeds are to be used for the partial refinancing of the outstanding bond PRS03 due in March 2012 and for general corporate purposes. In fact, in connection with the offering Prosafe purchased $46.4 million of that security at par. ABG Sundal Collier and Pareto Securities acted as joint arrangers of the issue. More details are included in the guts of the deal below. Continue Reading
Offshore Drilling Interest Unabated
If you want to market an offshore drilling transaction, particularly a start-up, Oslo must be one of the first stops, if not the only, on your itinerary. This is clearly evident from the following two deals which closed last month. The appetite for offshore appears to be nearly insatiable.
Prospector Offshore Drilling S.A.
In early December, Prospector Offshore Drilling S.A. successfully closed it private placement of 35 million shares at a subscription price of $2/share. Total gross proceeds amounted to $70 million. As part of the offering the Skeie Group and the management team agreed to subscribe for a minimum of$15 million, of which the latter on its own agreed to subscribe for $1.6 million. Post-issue there will be 35.445 million shares outstanding, with new investors owning 98.74%. Proceeds will be used for the initial down payments for the construction of two high specification harsh environment (“HS/HE”) jack-up drilling rigs as well as project management costs and SG&A until delivery of the first rig. While the rigs are classed as HS/HE, they can operate in the North Sea but are not suitable for Norway and the Arctic, where the delivery cost of a compliant rig is in excess of $500 million, more than double the cost of the Prospector rigs.
Offshore Drilling Interest Unabated
If you want to market an offshore drilling transaction, particularly a start-up, Oslo must be one of the first stops, if not the only, on your itinerary. This is clearly evident from the following two deals which closed last month. The appetite for offshore appears to be nearly insatiable.
Prospector Offshore Drilling S.A.
In early December, Prospector Offshore Drilling S.A. successfully closed it private placement of 35 million shares at a subscription price of $2/share. Total gross proceeds amounted to $70 million. As part of the offering the Skeie Group and the management team agreed to subscribe for a minimum of$15 million, of which the latter on its own agreed to subscribe for $1.6 million. Post-issue there will be 35.445 million shares outstanding, with new investors owning 98.74%. Proceeds will be used for the initial down payments for the construction of two high specification harsh environment (“HS/HE”) jack-up drilling rigs as well as project management costs and SG&A until delivery of the first rig. While the rigs are classed as HS/HE, they can operate in the North Sea but are not suitable for Norway and the Arctic, where the delivery cost of a compliant rig is in excess of $500 million, more than double the cost of the Prospector rigs.
Distress Suits Seadrill
Earlier this week, Seadrill Limited announced that it had agreed to acquire two ultra-deepwater semi-submersible drilling rigs, the Seadragon I and Seadragon II, which are currently under construction at Singapore’s Jurong shipyard. The total project price is expected to be $1.2 billion inclusive of all pre-delivery costs, with delivery in 1Q and 4Q 2011.
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Pareto and Odin Products Confab
Last week, Pareto Securities and Odin Group hosted a seminar on the product market and the news was generally good. In the introductory presentation on the market, Pareto’s Martin Korsvold, highlighted the “Positive Delta”, the fact that rates are at an historic low levels and upside is likely as market balance recovers. This outlook is supported by:
• A manageable orderbook compared to other shipping sectors
• Demand to outstrip supply going forward
• The larger trend of more oil being refined closer to production areas
• Limited investor knowledge of products compared to crude shipping, thereby creating opportunities
• Oil demand trend gives a bullish backdrop as the oil market has tightened significantly in 2010 driven by strong demand growth, as evidenced by declining inventories.
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