Volatility and Uncertainty? Where?

Any concerns the market or we had with respect to volatility and uncertainty in the markets were put to rest last Thursday when General Maritime priced its follow-on offering.  While being an established company was key, we also noted the positive trend in the share price as both the vessel acquisition and follow-on offering were announced. The result was in our estimation remarkable. Described as a blowout, the deal was over 2 times oversubscribed with all the shares purchased by institutional buyers Due to demand, the deal was upsized by 20% and yet no one received their full allocation.  Moreover, from a pricing perspective, the shares were discounted by the typical 4.5% from the day’s closing price. While the transaction was accretive and positive in the long run, the results were a strong vote of confidence in Peter G. and his entire team.

Like the earlier high yield offering, it had to be done and the whole world knew it (the downside of transparency), not a favorable position for any seller. Yet Genmar’s team of bankers together with management clearly overcame that problem raising net proceeds of $195.6 million (exclusive of the green shoe), which when combined with the proceeds of the credit facility provided available financing totaling $567.6 million and therefore a funding gap of $52.4 million based upon the agreed purchase price of $620 million. However given the demand for the shares it is a near certainty that the green shoe will be exercised generating further gross proceeds of ~$31million making the gap easily manageable.
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Tinker to Evers to Chance

The shipping version of this famous baseball double play combination is Angelopoulos to Georgiopoulos. Like Eyjafjallajokull, a dormant volcano that was quiet for centuries, Peter G’s companies erupted with news of acquisitions, some known and others new. First, the much-publicized acquisition of five tankers by General Maritime Corporation from Mr. Angelopoulos’ Metrostar Management Corporation was formally announced. Genmar has agreed to acquire five VLCCs, with an average age of 4.2 years, and two Suezmax newbuildings, to be delivered in 4Q 2010 and 2Q 2011 for an en bloc price of approximately $620 million. The seven double hull vessels are expected to be delivered between July 2010 and April 2011 and will effectively increase the size of the fleet in tonnage terms by 50%, while improving the fleet’s age profile. Moreover it increases Genmar’s exposure in the VLCC market from 2 to 7 vessels. Two of the VLCCs have time charters, which expire in the 1Q 2011, with the balance being charter-free upon delivery.

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All Eyes Are On Genmar

We know that General Maritime’s dynamic duo, Messrs Georgiopoulos and Pribor are on the road marketing their $300 million senior unsecured notes offering due in 2017 and so, while they are busy selling we thought we would take a read of the high yield market.

Earlier this week, Navios Maritime Holdings closed its successful $400 million private offering of first priority ship mortgage notes due in 2017. Rated BB-/Ba3, the coupon on the notes was 8.875% and was priced to yield 9.125%. The company escrowed $105 million of the proceeds to provide additional financing to complete the purchase of two new vessels with the balance used to repay existing credit facilities.
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John Wobensmith Goes to Genco, Continues Trend of Bankers to Owners