A First Ever – Safe Bulkers Accesses Japanese ExIm Financing

Safe Bulkers, Inc. had entered into credit agreements with Japanese governmental financial institutions in the amount of USD 122.4 million to finance three Japanese newbuilding Post-Panamax 95,000 dwt bulkers. One of the vessels delivered last year with the other two expected to deliver in 2011 and 2012.

Structured in accordance with OECD approved credit schemes, the financing is repayable over 12 years and has very competitive financing terms. Interest is likely calculated based upon Commercial Interest Reference Rates, which in the case of dollar loans is based upon U.S. Treasuries. The loan agreement was concluded with the Japan Bank for International Cooperation and Citibank Japan Ltd, acting as lead arranger. Insurance for approximately half of the amount was provided by Nippon Export and Investment Insurance, the official ECA of Japan. Continue Reading

A First Ever – Safe Bulkers Accesses Japanese ExIm Financing

On Tuesday, Safe Bulkers, Inc. announced that it had entered into credit agreements with Japanese governmental financial institutions in the amount of $122.4 million to finance three Japanese newbuilding Post-Panamax bulkers. One of the vessels delivered last year with the other two expected to deliver in 2011 and 2012.

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Equity Sales Continue – Navios Maritime Partners and Safe Bulkers Follow-on

While the Golar LNG Partners IPO was a surprise, the prevalence of follow-on offering is not. Last week, Teekay LNG and Navios Maritime Partners LP (“Navios Partners”) successfully concluded their offerings and they were joined this week by Safe Bulkers Inc. While there is nothing that indicates that the window is closing, there nonetheless seems to be a rush to offer.

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Beyond Advisory

Last week, Evercore Partners took a major step forward in evolving beyond its staple business of advisory work. Although Evercore did receive its broker dealer license last year, the only public transaction in which it participated was the Safe Bulkers follow-on offering. But that is understandable given their herculean efforts in restructuring Danaos and Trico Marine Services. The company’s New Year’s resolutions clearly called for an expanding involvement in the capital markets.

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Problem Solving – Chinese Style

We are going to go out on a limb and read between the lines of Safe Bulkers’ press release this past Tuesday. We apologize in advance for any errors, but the release is carefully crafted to minimize details and therefore left us to use our imagination.

The company announced that it had entered into a shipbuilding contract for the construction of a Chinese built 180,000 DWT Capesize bulkcarrier at a contracted price of $53 million (less than the current CRS assessment of $57 million), with an expected delivery in the 3Q 2012. The short delivery time frame is the first hint and we feel comfortable in concluding that the vessel is a re-sale probably ordered in 2008 at a price of ~$88 million, based also upon CRS estimates as of year-end.  No payment terms are provided nor is there any indication whether Chinese banks or export financing is attached.
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A Look at the Numbers – “You got to know when to hold ‘em, know when to fold ‘em”

By George Weltman

One does not often hear public companies these days speaking about going private. And why should they? In today’s world of limited bank lending, access to capital is paramount, with liquidity a close second. The world has changed immeasurably from the past when public shipping companies worried about the lack of recognition or respect that their shares received, what perhaps could be called the Rodney Dangerfield syndrome.

Years ago, shipping shares were on no one’s radar and China had yet been admitted to the WTO. Other than OSG, TK and NATS among others in the U.S., shipping shares were mainly traded on international exchanges, where shipping held some importance.
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Silence Is Golden

It’s Wednesday, as we write this, and for the first time we can remember in months it’s been a quiet week in terms of transactions. We took the opportunity of a free moment to meet with Mark Friedman and Hugh Baker of Evercore Partners. Our agenda was twofold: we wanted to understand how Evercore is positioning itself in the competitive landscape of investment banking and to engage in a post-mortem of the recent shipping equity offerings to better understand why some have succeeded while others struggled.

Evercore is different. It is obvious when you walk into their offices, which are quieter than a library should be. There is no trading floor. This is about advisory work in the old style, built on relationships and trust. Like all bankers, they are client-centric, but with a difference. Lacking distribution, they are less driven by the constant need to feed securities through a distribution network. Instead, they are focused on long-term relationships and providing the highest quality advice with respect to their clients’ strategic needs.
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Done, But at a Price

Safe Bulkers successfully sold its offering of 9 million shares last week. After a four day road show, the deal was priced Thursday at $7, a discount of 15% from the last closing price before the announcement and 4.89% from Wednesday’s closing price.

Like most things in life timing is everything. It has been a very busy few weeks in the shipping equity markets, with investors possibly suffering from deal fatigue. According to FBR’s calculations, thus far in this first quarter, shipping companies have raised approximately $1.05 billion in equity, of which $485 million was related to IPOs and $561 million to follow-on offerings.  Among the many new deals circulating in the market were the Diana Container Company, a private placement by Univan, Baltic Trading, Crude Carriers, Alma Maritime and Scorpio Tankers. Then there were the follow-on offerings that included Teekay Offshore and OSG. Thrown into that mix, Safe Bulkers may have gotten short shrift. But we also believe that buyers demanded a deep discount reflecting the high portion of shares owned by insiders (82%) and the commensurate low float.
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Safe Shelf

Today, Safe Bulkers, Inc. filed a shelf registration to sell up to $300 million of common stock, preferred stock, warrants and subscription rights. Noticeably absent from the registration were debt securities.

Polys Hajioannou, Chairman and Chief Executive Officer, stated, “While the Company does not currently intend to offer securities registered pursuant to the registration statement, the registration statement provides the Company with greater flexibility to take advantage of favorable market conditions as they may arise.” Legal advisors were Cozen & O’Conner and Cravath, Swaine & Moore. Deloitte, Hadjipavlou, Sofianos & Cambanis provided accounting advice.

Waivers And More Waivers

Not unsurprisingly, the difficulties in the marketplace are becoming more evident as the number of waivers of covenants increases in the public sphere. However, we understand that it is on the private, or dark side if you will, where the heavy lifting, at least in terms of restructuring, is taking place. The appropriate analogy might be the bare-knuckle storm below the calm sea of the public genteel discussions. Nevertheless, these exercises may be nothing more than band-aids should the market not improve. We certainly understand the cautious approach taken with respect to the public companies given the ramifications. The question remains as to what impact the private discussions might have on the public. We watch and wait as the parties stake out their positions.
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