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“‘Twas the Night Before Christmas”
It is never to late to talk about a Christmas miracle and it appears that Messrs. Zoullas and Ginsberg of Eagle Bulk Shipping may have pulled one off. Although we do not know Mr. Zoullas all that well, we are well acquainted with Mr. Ginsberg’s capabilities under fire having watched him carefully manage the demise of the Nakash Brothers’ (Jordache ) adventure in shipping through its Kedma operation in the mid-1980s. With little support from the owners and the assistance of a chartering man, Alan was a proverbial one-armed paperhanger. In what was previously one of the most turbulent times in shipping, Alan was fixing, scrapping and repairing ships. Payables and receivables were carefully managed, as there was no cash. Yet somehow the banks, of which RBS was one, were paid off. Alan’s performance, in his first baptism under fire, created great credibility with the banks and will stand him in good stead during these times.
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Christmas Comes Early!
In conjunction with its reporting third quarter earnings on Tuesday, DHT Maritime (“DHT”) announced that its Board of Directors has decided, after considering the strong operating results for the first three quarters of the year and the company’s current robust liquidity position, to increase the dividend by $0.05 (20%) to $0.30 for the third quarter of 2008. We expect this is a special dividend and does not change the current fixed dividend of $0.25.
The solid earnings release and dividend increase is a very strong sign in this economy and investors reacted favorably by pushing the share price up over 11% to $5.15 on heavy volume on the day of the earnings release. DHT convincingly bucked the general market trend, as most of the peer group was lower.
The incremental “cost” or cash flow impact of rewarding shareholders was a manageable sum of $1.75 million, in light of its contractual revenues and cash position of $52.6 million adjusted for the debt repayment (see below). Nevertheless, this is most welcome news amongst the plethora of bad news these days.
3rd Quarter Report Card
Last week, Dealogic published its 3rd quarter scorecard measuring the performance of the syndicated loan market for shipping transactions. Below we have reproduced their tables showing the Top 20 Mandated Lead Arrangers and Bookrunners for the nine-month period. As far as first and second place are concerned there is no surprise as Nordea and DnB Nor continue to battle it out with Nordea taking top honors as bookrunner and DnB Nor in first place, by the closest of margins, as mandated arranger.
Largest FPSO Project Loan Ever
BTMU and Fortis, as Coordinators, announced this week the successful closing of a $585 million project loan to finance the conversion and subsequent operation offshore Brazil of the FPSO Espirito Santo. The FPSO is owned by SBM Offshore (51%) and MISC Berhad (49%) and upon delivery will enter into a 15 year charter to Shell Brazil.
Despite the challenging market conditions, a total of 11 banks (BNP Paribas, BTMU, CIC, DnB Nor, Fortis, ING, Mizuho, Rabobank, RBS, Sociiete Generale and SMBC) participated in the financing. The loan was significantly oversubscribed which all owed for final take downscaling for all syndicate members.
Hapag-Lloyd Ponders Its Future
As questions about Hapag-Lloyd’s future continue to circulate, we thought it worth a refreshed look at how the deal came about and where it might be going. Hapag-Lloyd parent TUI’s interests have long been split between its core tourism business and a fairly substantial container shipping business, representing EUR 449 million and EUR 197 million respectively in 2007 underlying EBITDA. TUI bolstered the shipping side of its business with the $2.3 billion acquisition of CP Ships in late 2005 that was also the catalyst for a $1.8 billion bank refinancing, handled by HVB, Deutsche Bank and Citi, and a EUR $1.75 billion bond issue handled by HVB, HSH, Citi and RBS.
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Safe Bulkers Files for IPO
It’s been awhile since we have seen a Greek dry bulk company file for an IPO in the United States. To us the IPO filing by Safe Bulkers is a comment not only on the robust state of the dry bulk market, but also the perception that the US equity markets are returning to life as a meaningful source of capital for global business.
Very briefly, Safe Bulkers is a dry bulk shipping company owned by Vorini Holdings, which in turn is controlled by Polys and Nicolaos Hajioannou. The company currently owns a fleet of 11 Japanese-built bulk carriers with an aggregate carrying capacity of 887,900 dwt and average age of 2.6 years. The fleet comprises panamax, kamsarmax and post-panamax class vessels. Safe Bulkers has also contracted for eight newbuildings to be delivered between 2008 and 2010, which include four post-panamax vessels, two capesize vessels and two kamsarmax vessels. The vessels are operated on a mix of spot and time charters. Management services will be provided by related party Safety Management.
Merrill Lynch and Credit Suisse are working as bookrunners on the offering, while Jefferies, Dahlman Rose, DnB NOR and Poten Capital will join as underwriters. Safe Bulkers is looking to raise as much as $253 million through the sale of 10,000,000 shares with a 1,500,000 share over-allotment option at a price of $20-$22 per share. The 10,000,000 shares represent a stake of approximately 20% in the company and all proceeds will go to the selling shareholder, Vorini Holdings. Potential IPO buyers are being enticed with a dividend yield of 9-10%.
Safe Bulkers has a wide range of credit facilities in place, but most recently between January and April of 2008, the company took out loans from DnB NOR, HVB and RBS totaling $120 million. All were swapped to fix rates that range from 2.73% to 3.95%.
In Debt
While the equity markets appear to have returned to life, the debt markets continue to face harder times. Significant increases in bank funding costs are translating into significant spread increases for customers, though the drops in base interest rates mean that all this still does not necessarily mean higher all-in borrowing costs. More important than rate increases have been rising bank standards, which have forced less established companies without existing banking relationships to look harder for capital.
The Week in Review
The week has been relatively quiet from a transaction standpoint, but sentiment by and large is upbeat. The shipping markets as a whole continue to perform above expectations, and the credit and equity markets functioning smoothly, if not lavishly.
For example, Caterpillar Financial Services this week entered into an agreement to increase Aker Philadelphia Shipyard’s credit line by $150 million. Under the agreement, Caterpillar will fund up to $80 million in construction costs for seven consecutive product tankers, valuing the full agreement at $560 million. Interest payments will be required only during the construction period, and Aker may apply the funding to up to three ships simultaneously. The deal takes care of financing for the remainder of the 12 Jones Act tankers under construction at the yard, which are to be sold to Aker American Shipping for bareboat charter to OSG America. Four these tankers have been delivered, three are currently under construction, and the remainder are to be completed by 2011. Continue Reading
Surveying the Credit Markets
Marine Money has concluded the collection of data for its 2008 shipping banker survey and would like to sincerely thank all who have participated. We are currently concluding work on our annual shipping portfolio league table and would like to thank the following banks for their cooperation and contribution to the development of a transparent and well-informed ship finance industry: Bank of Ireland, Bank of Scotland, Bremer Landesbank, Calyon, Commerzbank, Danish Ship Finance, Danske Bank, Deutsche Bank, Deutsche Schiffsbank, DnB NOR, Dresdner Bank, DVB, Helaba, HSH Nordbank, HVB, JP Morgan, KfW, Lloyds TSB, Natixis, Nordea and RBS. If you don’t see your bank’s name on the list, think it belongs there, and haven’t been in touch with us this weekend, please send an email to nhuvane@marinemoney.com ASAP to ensure you are included. Both survey and portfolio data will be released in the upcoming May issue of Marine Money.
Double Hull Tankers Follows On
April was certainly the month the shipping equity markets sprang back to life – at least for follow-on offerings. Seaspan (SSW) was out first on April 10 with an offering that raised nearly $240 million, followed by Teekay LNG (TGP) on April 17 with a $165 million offering. Then this week Double Hull Tankers (DHT) saw the positive trend and took the opportunity to position themselves for future acquisitions by raising $84 million with the offering of 8,000,000 shares at $10.50 per share in a deal led by Merrill Lynch and UBS with Dahlman Rose also acting as an underwriter. The offering was upsized by 1,000,000 shares on the back of strong institutional demand, though it priced at a relatively steep discount of 12% to where the shares were trading when the transaction was announced just one day before. The accompanying graph shows how the price performance of SSW, TGP and DHT post offering announcement compare. Continue Reading
The Official Guide To Marine Finance Providers
Shipping Index
