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Talk of the Town – A Market View
While in Oslo the week before last, the deal on everyone’s lips was the Golden Close Maritime Corp.’s $460 million senior secured bond offering to finance the Deepsea Metro I, a drillship capable of drilling in water depths of 10,000 feet. Scheduled for delivery on May 2011, the vessel is being constructed in Hyundai Heavy Industries at a contract price of $668.39 million with an all-in delivered cost of approximately $800 million.
Not Just a Warm-up
Prior to the start of the festivities, Teekay Corporation held its successful shareholders meeting. The room was filled with over 100 spectators with another 200 viewing through the webcast. What was extremely interesting to hear from the Teekay delegation was the acknowledgement that they did not recognize many of the people in the room. Fresh blood!
The first session began under cloudy but dry skies an unusual event in New York these days. The room was packed with the audience hoping to glean insights from last year’s deal of the year winners as the architects of the transactions discussed their deals and how they fit in today’s marketplace. The discussion was led by Stephen Peepels of DLA Piper.
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Don’t Throw the Baby Out with the Bath Water or How I Learned to Stop Worrying and Love the Fundamentals (with thanks to Stanley Kubrick)
With a full house, Simon Rose began Dahlman Rose’s 1st Annual Global Transportation Conference confessing that despite Wall Street’s having spent years educating investors as to the difference between period and spot business they have largely been ineffective. We disagree with this assessment believing the current market reflects a herd instinct and an avoidance of betting against the tape. The companies presenting at the conference are all clearly differentiated from spot players, with visibility of earnings and cash flows yet their shares have also been pummeled as the BDI continues its decline. Mr. Rose exhorted the crowd to take advantage of this anomaly, take a reality check and not to trade on fear.
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The Wall Street Journal’s Shipping Analysts Of the Year
For a Wall Street analyst the annual Wall Street Journal Best on the Street rankings is like an AcademyAward, only worth more, certainlyto those investors who bought basis the winning analysts picks.
This year Scott Burk at JPMorgan, but Bear Stearns when his picks were made (JPM acquired Bear Stearns in a sub-prime fire sale last March) came out number one in the Industrial Transportation classification. Doug Mavrinac of Jefferies & Co came in second and Omar Nokta with Dahlman Rose grabbed the third spot.
Sentiment Turns
In a welcome turn of events, the market was resoundingly upbeat this week. The pace of transactions picked up notably across sectors, and we can’t help but view this as a positive sign for the financing market going forward.
On the M&A front Excel and Quintana successfully closed their merger. Each issued and outstanding share of Quintana common stock was converted into the right to receive $13.00 in cash and 0.3979 Excel Class A common shares. The merger creates a combined company that operates a fleet of 47 vessels with a total carrying capacity of approximately 3.7 million DWT and an average age of approximately eight years. Stamatis Molaris stepped into the role of CEO of the combined company, while Hans Mende, Corbin Robertson III and Paul Cornell joined its board of directors. We were happy to hear that the deal was executed smoothly. Moreover, Nordea and the underwriting team were successful in syndicating the debt levels required to make the deal possible – without needing to bring market flex provisions into play.
TMI?
What a week for investors! Starting with CMA’s annual event, continuing with JPMorgan’s Conference and concluding with the Capital Link Forum, it is conceivable that even the most interested observer of the industry may have suffered from information overload. Thankfully, with Good Friday, many of us had the opportunity to recover with a long-weekend.
Despite the early start, the Capital Link Forum played to a full house. There were company presentations galore interspersed with lively and informative panel discussions. With far too much information to distill, here is a highly selected compendium of our outtakes.
Courting Quintana
Like many closely watched deals, especially those of the public variety where publicly reported information is strictly regulated, the headlines that came out over the past months regarding Quintana’s future were sometimes conflicting and often confusing. And with good reason; many insiders could not have said in early January what the future of the company would be, nor were they at liberty to share information about the details of the sale process. That said, we considered it worthwhile to take a deeper look at Quintana’s sale process, the offers the company received, and other alternatives they considered, as well as the valuations calculations and assumptions that formed the basis for Quintana’s ultimate decision to recommend Excel Maritime’s cash and share offer. Details have been made available to the public in advance of Quintana’s April 14 shareholder vote. Continue Reading
Transaction Report
Ship finance is all about maximizing value. As Quintana’s sale moves forward, TUI has announced that Hapag-Lloyd is officially in play, to the satisfaction of minority holder John Fredriksen. Mr. Fredriksen meanwhile, just after accepting the prestigious CMA Commodore Award from Morten Arntzen, announced that his interests had taken a 5.2% stake in Mr. Arntzen’s OSG, with a forward contract for an additional 1,628,300 shares that would bring his stake to 9.6%. With OSG trading at barely above half its net asset value last week, Mr. Fredriksen’s investment focus on shares rather than ships is hardly surprising, and a future combination for the two companies is certainly in the realm of possibility.
Re-Inventing Oneself
Last week, Cao Deambrosio, Head of Business Development, of GE Transportation Finance (“GETF”) sat down with us to discuss its purchase of a minority interest in Aegean Baltic Bank (“AB Bank”), which closed on March 3rd. AB Bank is a specialty banking institution serving the Greek based and global shipping industry. Based in Athens Greece, AB Bank is a leading arranger and provider of financing with $2.2 billion of loans under management. And as we know, loan management is highly remunerative in terms of fees and other income.
Athenian and Viking Confab
In front of a packed crowd at the New York Helmsley, the Hellenic-American and Norwegian-American Chambers of Commerce held their 14th Annual Joint Shipping Conference under the catchy title “Are the Bulls and the Bears Right?”
The day started off with derivatives, a tough topic for early in the morning. Nevertheless, the presenters pulled it off and kept everyone interested. To start off Robert Shaw of Mystras Ventures gave a great overview and primer on freight derivatives. In particular, he emphasized their importance of derivatives for hedging but noted that freight volatility and correlation with other commodities has attracted financial players into the market, a recurrent theme.
The Official Guide To Marine Finance Providers
Shipping Index
