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Bank Loan in Drag – NewLead Heads to Norway
As any good salesman will tell you it’s all in the packaging, particularly when you are entering new markets. Back in December, NewLead Holdings Ltd filed a form F-1 to sell in a follow-on offering $115 million of common stock here in New York. Unfortunately, the timing was off and the offer was shelved until the window re-opens. The company, however, was not dissuaded and, together with DnB NOR and S Goldman Advisors, jumped on a flight to the second largest source of capital for shipping, Oslo, with a transaction that marries the “best” of secured lending with the terms of a high yield bond. The challenge for the company and its advisors was to overcome the fact that the company is a small cap Greek company, which is not involved in oil and gas. There is no better team to speak “Norwegian” and sell the deal. DnB NOR is a key lender and major capital markets player in Oslo and knows both markets intimately. Sheldon Goldman also has broad capital markets exposure here, but perhaps more importantly, he understands the Greeks through his role as financial “consigliere” to Angeliki Frangou.
Yes, There Was Equity Too
China’s inflation and Ireland’s banking crisis triggered this week’s market volatility. Nevertheless, Scorpio Tankers Inc. and Navios Maritime Acquisition Corporation (“NMA”) moved ahead with equity follow-on offerings. Scorpio’s registration was for a one-off transaction, whereas Navios’ was a supplement to its recently filed broad shelf registration.
As Predicted, Warrant Program a Success
Today, Navios Maritime Acquisition Corporation announced the successful completion of its warrant program. Of the total public warrants, 76.13% were exercised, exceeding the minimum threshold of 75%, thereby allowing the exercise of the private warrants. The final tally showed 19,262,006 public warrants were exercised of which 19,246,056 were exercised on a cashless basis and 15,950 were exercised by payment of the $5.65 cash exercise price.
As a result of the successful conclusion of the program, Navios Maritime Holdings (“Navios”) and Angeliki Frangou will exercise 13,835,000 of the privately issue warrants for cash. The remaining 90,000 private warrants will also be exercised of which 75,000 will be done on a cashless basis.
Paying the Bill
Ms. Angeliki Frangou and her team will search everywhere for funding, leaving no opportunity unturned. And certainly no one is more creative. To pay for Navios Maritime Acquisition Corporation’s recent purchase of VLCCs, the company announced, last week, that it would give the holders of the 25.3 million outstanding warrants issued in the initial public offering (“Public Warrants”) a limited opportunity to acquire shares at a reduced price. The offer is coupled with a consent solicitation accelerating Navios Maritime Holdings ability to exercise certain warrants on identical terms.
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A Book Review
While it will never be a best seller, Navios Maritime Acquisition Corporation’s (“NMAC”) proxy statement makes a cogent argument for shareholder approval of the pending transaction for the acquisition of 11 newbuilding product tankers (four LR1s and seven MR2s) and two chemical tankers with an option to acquire two further LR1 product tankers. The acquisition cost is $457.7 million of which $334.3 million will be financed with debt. Included in the $344.3 million in debt facilities is a $52 million loan facility, which is in advance stages of negotiation, but, unlike the rest, not yet committed. The balance of the purchase price will be funded from the $250.8 million of proceeds of the initial public offering of 25.3 million units, including 3.3 million units issued upon the exercise of the over-allotment option. Invested in Treasuries, the cash position of the trust account stood at $251.5 as of year-end. The actual cash availability is uncertain however as unit holders can vote against the acquisition and exercise their conversion rights.
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With 2 Months to Spare
Today, Navios Maritime Acquisition Corporation, the SPAC formed by Navios Maritime Holdings (“Navios”) back in June 2008, announced that it had agreed to acquire a 13 vessel fleet, consisting of 11 product tankers (4 LR1s and 7 MR2s) and 2 chemical tankers for an aggregate purchase price of $457.7 million. The company also has options to purchase two additional LR1s for $40.5 million each. The purchase price will be paid from cash ($123.4 million) and $343 million of bank financing consisting of a three term loans aggregating $277 million and a $57 million revolving credit facility. The high leverage also leaves excess cash remaining for growth from the original $220 million raised. The company’s rationale for the purchase is its belief that the assets are being acquired near their inflation adjusted historic low prices and the anticipated increased demand for products as the global recession eases.
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Not to Be Outdone
Navios Maritime Partners announced after the market closed Wednesday that it intended to issue 4 million common units with a green shoe of 600 thousand units. Proceeds would be used for fleet expansion and/or general partnership purposes. The deal was priced today at $14.90 per unit, a discount of 5.8% from the prior close.
Joint book running managers were Citi and JPMorgan with S. Goldman Advisors, DVB and Cantor Fitzgerald serving as co-managers.
Denouement
The Aries Maritime Transport Limited (“Aries”) story begins anew. Last week, Aries entered into a securities purchase agreement with Grandunion Inc., a company controlled by Michail Zolotas and Nicholas Fistes, pursuant to which the company has agreed to acquire three capsize bulkcarriers, with an approximate net asset value of $36 million in exchange for 18,977,778 shares. A description of the vessels being acquired is shown herein.
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Back to the Well
Utilizing its $500 million shelf registration from February, Navios Maritime Partners (“NMP”) went back into the market last week for its second follow-on offer of this year. In May, NMP issued 3.5 million shares at a price of $10.32. Last week’s offering of 2.8 million shares was priced $12.21 per share a discount of 6.5% from the prior day’s closing price. Proceeds will be used to fund its fleet expansion and/or for general corporate purposes.
Navios Comes Full Circle
Less than 10 days after making its first public F-1 filing, SPAC Navios Maritime Acquisition Corporation successfully priced its 22,000,000 unit IPO at $10.00/unit to raise gross proceeds of $220 million. The deal timetable was ultimately compressed and the deal well oversubscribed by a mix of SPAC investors, shipping fundamental investors, and those who have been following Navios. Units had traded up a half a percent at close today to $10.05 in pleasant contrast to the Dow’s 358 point fall.
The successful issue of the SPAC in itself is evidence of an improved market, and good news for First Class Navigation, which is understood to be currently in the market with a $125 million SPAC. However there is clearly more to it than that. More and more it’s been the “who” mattering as much as the “what” in shipping deals, and nowhere is this more important than a SPAC – where the “who” or the “jockey” is exactly the part of the deal investors bet on. Angeliki Frangou’s success with the International Shipping Enterprises SPAC and its subsequent Navios acquisition and her sharpened roadshow skills no doubt were major forces behind the deal’s success, particularly as both SPAC and shipping investors are familiar with her track record and her story.
As to the specifics of the deal, Navios Maritime Acquisition Corp (“NMAC”) is seeking to acquire one or more assets or operating businesses in the marine transportation and logistics industry, with a primary focus on businesses outside the dry bulk sector. Though some speculation has circulated regarding the use of NMAC as a way to spin out Navios’ logistics operations, the conflicts inherent between the two public companies are too deep to make such a deal attractive or likely, and it should be interesting to see what kind of target with which NMAC emerges.
JP Morgan and Deutsche Bank are acting as joint bookrunning managers on the offering, while S. Goldman Advisors is also participating. A 3,300,000-unit over-allotment option remains outstanding. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo and Fried, Frank, Harris, Shriver & Jacobson are acting as counsel to the underwriters while Reeder & Simpson is acting as counsel for the issuer.
Each unit in the offering consists of one common share and one warrant to purchase a common share at a price of $7.00. Sponsor Navios Maritime Holdings committed to purchase 7,600,000 warrants at $1.00 each simultaneous with the closing of the offering, amounting to a $7.6 million investment or about 3% of the company’s value. The sponsor is also making a $500,000 loan and will hold a 20% stake in NMAC. Backing up the deal’s credibility, NMH and NMAC CEO Angeliki Frangou entered into an agreement with JP Morgan and Deutsche Bank to place limit orders for up to $30 million of NMAC common stock to purchase any shares of our common stock offered for sale (and not purchased by another investor) at or below a price equal to the per-share amount held in our trust account as reported in our initial preliminary proxy statement filed with the SEC relating to the company’s initial business combination, until the earlier of (1) the expiration of the buyback period or (2) the date such purchases reach $30 million in total. She also agreed to vote all such shares in favor of NMAC’s initial business combination.
For a SPAC, of course, the IPO is just the beginning. Much like a private equity firm that has a new fund ready to invest, the real excitement should lie in the months (or year) ahead.
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