Taking Control – Seanergy Buys Out the “Minorities”

Last week, Seanergy Maritime Holdings announced that it had entered into letters of intent for the acquisition of the remaining ownership interests in Bulk Energy Transport (50%) and Maritime Capital Shipping (51%) that it does not own. Following the acquisitions, the Company will wholly own a fleet of 20 dry bulk vessels with a combined cargo-carrying capacity of approximately 1.3 million dwt and an average fleet age of 12.8 years. In terms of vessels, the diversified fleet will consist of four Capesize, three Panamax, two Supramax, one Handymax and ten Handysize dry bulk carriers. The sellers are related companies due to the common shareholder, the Restis family.

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Done!

Seanergy Maritime Holdings announced on Wednesday that it had concluded the previously agreed acquisition of a 51% interest in Maritime Capital Shipping (Holdings) Limited for a purchase price of $33 million which was paid from the proceeds of the recent equity offering and cash on hand. A projected adjusted EBITDA contribution from MCS of $23 million for the balance of 2010 and $40 million in 2011 implies a purchase price/EBITDA multiple of 1.6 times on an annualized basis. The remaining 49% has been retained by the seller, which is controlled by the Restis family, one of Seanergy’s major shareholders. As a result of the acquisition, the company’s fleet now consists of 20 dry bulk vessels, up from 11, including four Capesize, three Panamax, two Supramax, one Handymax and 10 Handysize bulk carriers with an average age of 12.7 years.

The acquisition, most importantly, enhances the overall stability and visibility of the company’s cash flows as well as provides a more balanced charter portfolio. On a combined fleet basis, Seanergy has secured under period employment 93% ownership days in 2010, 58% for 2011, 27% for 2012 and 19% for 2013.

Following a Successful Strategy

Earlier this week, Seanergy Maritime Holdings announced that it had entered into a letter of intent with Maritime Capital Shipping (Holdings) Ltd (‘Holdings”) to acquire a 51% interest in Maritime Capital Shipping Limited (“MCS”), a company founded by Mark Harris formerly of Pacific Basin in 2006. The company operates a fleet of 9 handysize bulkcarriers, with an average age of ~10.7 years, that it employs on time and bareboat charterers with well-established operators. Holdings, a company controlled by the Restis family, will retain a 49% interest in MCS.
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The Market Speaks

Last Friday, Seanergy Maritime Holdings successfully closed its follow-on offering raising $25 million from the public and an additional $5 million from insider, Victor Restis. When the process began with the filing of the initial registration statement on January 11, the shares were trading at $2.81 necessitating a sale of approximately 8.8 million shares.

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Don’t Forget Follow-ons

We hear word that Maxim Group is the lead underwriter for a $30 million secondary offering for Seanergy Maritime Holdings. Victor Restis is expected to put in $5 million. The deal goes to market the week of the 24th.

Seanergy Extends

Also on Friday, Seanergy Maritime Holdings announced that its banks have agreed to a waiver extension of its LTV covenant up to January 1, 2011. This avoids the potential issue with its accountants with respect to the treatment of long-term debt, which will now remain classified as such.

Waived

After a rather quiescent period, last week marked the return of waivers and restructurings. Seanergy Maritime Holdings announced that it 50% owned affiliate, Bulk Energy Transport (Holdings) Limited had signed a supplemental agreement with its lenders receiving a reduction of the security requirement and minimum equity ratio for the period up to July 1, 2010.

DryShips also announced that it had finalized its previously agreed waivers with the German banks, Nord LB and West LB covering their respective loans of $116 million and $67 million. According to Mr. Economou, “We are now left with $187.5 million of outstanding debt, where constructive discussions with the banks continue for waivers and we expect to have those concluded shortly.” What a long hard road it’s been.

Not Even the Young Are Immune

With only four months elapsed since inception, Seanergy Maritime Holdings also reported 4thQ and year-end 2008 results. During September, the company took delivery of the bulk of its fleet of six vessels, consisting of two Panamax, two Supramax and two Handysize vessels.

During this quarrter, the company took a non-cash impairment charge of $49.3 million against goodwill ($44.8) and one vessel ($4.5) reflecting declining asset values. This, in turn, required a waiver of the breach of the company’s LTV covenant by the banks, with the quid pro quo being the suspension of the dividend.

Nevertheless, Seanergy is well positioned with cash reserves of $44 million as of today in addition to locked-in above market revenues through September 2009. The company is the beneficiary of a somewhat incestuous relationship. The vessels, originally acquired from the Restis Group (“Restis”), are chartered to South African Marine Corporation (“SAMC”), also an affiliate of Restis, which, in turn, owns 61% of Seanergy. Given this relationship and relatively short remaining charter duration, there is little likelihood that SAMC will terminate or renegotiate these charters. Moreover, there is a strong probability that SAMC, as operator, fixed at least some of these vessels out at higher rates. And, as it is larger and private, Restis is in a better position to withstand the pain than its offspring.

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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