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
Written by:
carisk | Categories:
Freshly Minted,
Transaction Report | March 20th, 2008 |
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A few weeks ago, we wrote an article in these pages called “Eagle Bulk – All About the Arbitrage.” The article outlined the recently filed S-1 for an IPO of handymax bulk carriers being offered by New York private equity fund Kelso. In this article, we discussed the concept of private equity funds buying ships just prior to, or even concurrent with, IPOs so that they could capture the arbitrage that exists between the value of ships in the private and public markets.
Although much of this premium has been drained away during the last six weeks due to choppiness in both the equity markets and the shipping markets, we believe it is likely to return in the very near future and look for shares back in the range of 1.5x net asset value. The transaction concept is one with which private equity funds are comfortable: buy a company cheap, then sell enough of it to the public to get their money out with a return through a dividend, and then keep a slug of shares in the company that has the potential to result in a real home run.
With the economics of the shipping markets fitting this bill, the concept is spreading, and we are seeing more and more non-shipping company issuers in the shipping markets. The way to think of this is that Wall Street wants products and is willing to pay a certain price for them, and in response a variety of experienced financiers are creating these products and attempting to bring them to market. There is nothing necessarily wrong with this; in fact companies created for the sole purpose of equity offering might offer cleaner management structures and fewer conflicts of interest than old-line companies.
This week, we saw the filing of an IPO called Quintana Maritime, which is backed by Corby Robertson, whose family sold the Quintana oil field in Texas to Exxon many years ago, and who has since made investments in commodities such as coal mining. Robertson has teamed up with First Reserve of Greenwich (who have been plotting an entry into shipping ever since their agreement to purchase OMI shares at about $1.50 each a few years ago failed amidst bad feelings) and American Metals & Coal International, also of Greenwich. Stamatis Molaris, former CFO of Stelmar, is serving as CEO and President of Quintana. Citigroup and Morgan Stanley, who lent the company the money it needed to acquire its fleet, are acting as joint bookrunning managers.
A Short History
Quintana does not have the storied history that many recent and future issuers have. They cannot point to hundreds of years of experience or their origins from an island – except perhaps Long Island. In fact, they were formed on January 13th, 2005, and began operations in the following April, in other words last month. As of March 31, 2005, Quintana had not taken delivery of any of the identified panamax vessels, though the company did take delivery of three such vessels in April, and expects to take two more in May and the remaining three in July, August and September.
Distinguishing Deals
One of the challenges borne of the incredible torrent of deals heading to market is differentiation. What we mean is that there is nothing particularly compelling about this deal compared to others currently or soon to be trading in terms of asset type, employment, age, deal size, management or structure. Like Eagle Bulk, Quintana has signed MOAs and placed deposits on the eight modern panamax bulkers outlined in Figure 1.
Although we expect valuations to improve, the company shows strong asset and structural similarity to Diana Shipping, which suffered from bad timing in both the shipping and equity markets that may have been exacerbated by the fact that it was fully priced and sold into the wrong types of accounts. This must be a little unnerving for the sponsors, and we fail to understand how this deal will ever be judged on anything other than how much of discount it is offered at relative to Diana. Although Quintana does not indicate that it will use the model of a dry cargo version of Nordic American Tankers as Diana did, the company does plan to repay its debt in full upon consummation of the offering.
Perhaps there will be enough buyers to go around. There is nothing inherently wrong with the Quintana deal, but the sponsors will need to see valuations improve and have one heck of a good roadshow. That said, with the firepower of Citigroup and Morgan Stanley behind them, who likely do lots of other business with the sponsors of this deal, it is unlikely that it will be sold into the accounts of hedge fund “flippers” as the Diana deal seems to have been.
Of Bridge Loans and Mezzanine
As we also wrote in our article about Eagle Bulk, these kinds of deals are not without risk to the sponsors as we cruise along a high point in the cycle. In fact, they involve a lot of risk. Unlike the Top Tankers IPO, in which the purchase of the Sovcomflot fleet was contingent upon a successful equity offering, both Eagle and Quintana involve the sponsors buying ships first and hoping they can get a premium in the future. In this case, the joint bookrunners have provided both secured debt and mezzanine facilities to result in 85% financing. This structure is not dissimilar in concept to the highly leveraged facility that Citigroup and Nordea provided to soon-to-be-public Genco, sponsored by yet another private equity firm, Oak Tree Capital.
Quintana entered into a $150 million bridge loan facility, dated as of May 3, 2005, with Morgan Stanley Senior Funding, Inc., not a regular player in the world of ship finance. In addition, the company entered into a new six-year three-month $262 million secured delayed-draw term loan facility, dated as of April 29, 2005, with Citigroup. The term loan facility consists of Tranche A, in an aggregate amount equal to the lesser of $213 million and an amount equal to 65% of the fair market value of the vessels, and a Tranche B, in an aggregate amount equal to the lesser of $49,210,500 and 15% of the fair market value of the vessels. The aggregate principal amount applied in respect of any vessel acquisition must not exceed 80% of the fair market value of the vessel. According to the filing, interest on amounts drawn will be payable at a rate of 1.625% per annum over LIBOR in respect of Tranche A and 2.50% over LIBOR in respect of Tranche B, for interest periods of 1, 2, 3 or 6 months or, if agreed by all lenders with commitments, 9 or 12 months. In the event the Tranche B term loans are not syndicated within 45 days, Tranches A and B will collapse into a single tranche and interest will be payable at a rate of 1.75% per annum over LIBOR.
Written by:
jilllaw | Categories:
Uncategorized | May 5th, 2005 |
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A few weeks ago, we wrote an article in these pages called “Eagle Bulk – All About the Arbitrage.” The article outlined the recently filed S-1 for an IPO of handymax bulk carriers being offered by New York private equity fund Kelso. In this article, we discussed the concept of private equity funds buying ships just prior to, or even concurrent with, IPOs so that they could capture the arbitrage that exists between the value of ships in the private and public markets.
Although much of this premium has been drained away during the last six weeks due to choppiness in both the equity markets and the shipping markets, we believe it is likely to return in the very near future and look for shares back in the range of 1.5x net asset value. The transaction concept is one with which private equity funds are comfortable: buy a company cheap, then sell enough of it to the public to get their money out with a return through a dividend, and then keep a slug of shares in the company that has the potential to result in a real home run.
With the economics of the shipping markets fitting this bill, the concept is spreading, and we are seeing more and more non-shipping company issuers in the shipping markets. The way to think of this is that Wall Street wants products and is willing to pay a certain price for them, and in response a variety of experienced financiers are creating these products and attempting to bring them to market. There is nothing necessarily wrong with this; in fact companies created for the sole purpose of equity offering might offer cleaner management structures and fewer conflicts of interest than old-line companies.
This week, we saw the filing of an IPO called Quintana Maritime, which is backed by Corby Robertson, whose family sold the Quintana oil field in Texas to Exxon many years ago, and who has since made investments in commodities such as coal mining. Robertson has teamed up with First Reserve of Greenwich (who have been plotting an entry into shipping ever since their agreement to purchase OMI shares at about $1.50 each a few years ago failed amidst bad feelings) and American Metals & Coal International, also of Greenwich. Stamatis Molaris, former CFO of Stelmar, is serving as CEO and President of Quintana. Citigroup and Morgan Stanley, who lent the company the money it needed to acquire its fleet, are acting as joint bookrunning managers.
A Short History
Quintana does not have the storied history that many recent and future issuers have. They cannot point to hundreds of years of experience or their origins from an island – except perhaps Long Island. In fact, they were formed on January 13th, 2005, and began operations in the following April, in other words last month. As of March 31, 2005, Quintana had not taken delivery of any of the identified panamax vessels, though the company did take delivery of three such vessels in April, and expects to take two more in May and the remaining three in July, August and September.
Distinguishing Deals
One of the challenges borne of the incredible torrent of deals heading to market is differentiation. What we mean is that there is nothing particularly compelling about this deal compared to others currently or soon to be trading in terms of asset type, employment, age, deal size, management or structure. Like Eagle Bulk, Quintana has signed MOAs and placed deposits on the eight modern panamax bulkers outlined in Figure 1.
Although we expect valuations to improve, the company shows strong asset and structural similarity to Diana Shipping, which suffered from bad timing in both the shipping and equity markets that may have been exacerbated by the fact that it was fully priced and sold into the wrong types of accounts. This must be a little unnerving for the sponsors, and we fail to understand how this deal will ever be judged on anything other than how much of discount it is offered at relative to Diana. Although Quintana does not indicate that it will use the model of a dry cargo version of Nordic American Tankers as Diana did, the company does plan to repay its debt in full upon consummation of the offering.
Perhaps there will be enough buyers to go around. There is nothing inherently wrong with the Quintana deal, but the sponsors will need to see valuations improve and have one heck of a good roadshow. That said, with the firepower of Citigroup and Morgan Stanley behind them, who likely do lots of other business with the sponsors of this deal, it is unlikely that it will be sold into the accounts of hedge fund “flippers” as the Diana deal seems to have been.
Of Bridge Loans and Mezzanine
As we also wrote in our article about Eagle Bulk, these kinds of deals are not without risk to the sponsors as we cruise along a high point in the cycle. In fact, they involve a lot of risk. Unlike the Top Tankers IPO, in which the purchase of the Sovcomflot fleet was contingent upon a successful equity offering, both Eagle and Quintana involve the sponsors buying ships first and hoping they can get a premium in the future. In this case, the joint bookrunners have provided both secured debt and mezzanine facilities to result in 85% financing. This structure is not dissimilar in concept to the highly leveraged facility that Citigroup and Nordea provided to soon-to-be-public Genco, sponsored by yet another private equity firm, Oak Tree Capital.
Quintana entered into a $150 million bridge loan facility, dated as of May 3, 2005, with Morgan Stanley Senior Funding, Inc., not a regular player in the world of ship finance. In addition, the company entered into a new six-year three-month $262 million secured delayed-draw term loan facility, dated as of April 29, 2005, with Citigroup. The term loan facility consists of Tranche A, in an aggregate amount equal to the lesser of $213 million and an amount equal to 65% of the fair market value of the vessels, and a Tranche B, in an aggregate amount equal to the lesser of $49,210,500 and 15% of the fair market value of the vessels. The aggregate principal amount applied in respect of any vessel acquisition must not exceed 80% of the fair market value of the vessel. According to the filing, interest on amounts drawn will be payable at a rate of 1.625% per annum over LIBOR in respect of Tranche A and 2.50% over LIBOR in respect of Tranche B, for interest periods of 1, 2, 3 or 6 months or, if agreed by all lenders with commitments, 9 or 12 months. In the event the Tranche B term loans are not syndicated within 45 days, Tranches A and B will collapse into a single tranche and interest will be payable at a rate of 1.75% per annum over LIBOR.
Written by:
carisk | Categories:
Equity,
Freshly Minted | April 5th, 2005 |
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Stelios Holds Celebration Party
The Maritime Hotel on 17th Street and 9th Avenue was the venue for Stelios’ victory celebration last night in Manhattan. Stelios invited all former Stelmar shareholders and well-wishers to the event. According to the invitation, “With $170 million dollars of additional shareholder value created for all shareholders in 27 days, there will be plenty of smiles in the room!” We believe there were.
The Maritime Hotel on 17th Street and 9th Avenue was the venue for Stelios’ victory celebration last night in Manhattan. Stelios invited all former Stelmar shareholders and well-wishers to the event. According to the invitation, “With $170 million dollars of additional shareholder value created for all shareholders in 27 days, there will be plenty of smiles in the room!” We believe there were.
Written by:
carisk | Categories:
Company News,
Freshly Minted | February 3rd, 2005 |
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DnB NOR Arranges $500m Cheap Unsecured Revolving Facility for OSG
Last week OSG filed an 8-K with the US SEC for a $500 million bilateral loan provided solely by DnB NOR. The deal was put together by Mr. Nicholai Nachamkin and his team in New York and provides a stunning 0.80% over Libor for the five first years and then 0.85% for the two remaining years of the term. For an unsecured loan and a one-bank deal, this price is extremely competitive. The unsecured loan will be used for refinancing some of Stelmar’s debt and will also go partly towards financing the OSG’s acquisition of the Stelmar shares.
Last week OSG filed an 8-K with the US SEC for a $500 million bilateral loan provided solely by DnB NOR. The deal was put together by Mr. Nicholai Nachamkin and his team in New York and provides a stunning 0.80% over Libor for the five first years and then 0.85% for the two remaining years of the term. For an unsecured loan and a one-bank deal, this price is extremely competitive. The unsecured loan will be used for refinancing some of Stelmar’s debt and will also go partly towards financing the OSG’s acquisition of the Stelmar shares.
Written by:
carisk | Categories:
Bank Debt,
Freshly Minted | January 27th, 2005 |
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By Urs Dür
The title depicts what was announced between mid-December 2002 and mid February 2003. It is a deceiving title but we had to catch your eye. Firstly it’s deceiving since much of what was announced has been long in development and/or is yet to be finalized. Secondly, and probably most importantly, it’s deceptive because the fundraising and acquisitions are not done yet, nor in our humble estimation, likely by a long shot.
Of course what we are referring to is Teekay’s (NYSE: TK) $800m acquisition of Navion in December and their $1 44m sub-debt convertible equity (PEP) announced and priced on Febrauay11th. We are also referring to General Maritime’s (NYSE: GMR) $525m acquisition of Metrostar’s existing assets at the end of January and Stelmar’s (NYSE: SJH) $177m purchase of Comninos’ controlled Target Marine’s 6 MR new- buildings on 10th February. The amount raised by these transactions in this period is approximately $1 .64billion, give or take a few million on the variables. The combined tonnage of the tanker deals – which have attributes that effect four different sectors of the tanker market including shuttle tankers, suezmax, aframax and product tankers – is about 4.05 million tonnes not including the chartered-in tonnage of Navion and its associated franchise value for TK. But these are anecdotal figures for the sake of measurement of scope, lets have some fun people!
Equally interesting is what has yet to happen. Most notably the quest to sell, on the part of Singapore listed Neptune Orient Lines (NOL), American Eagle Tankers (AET) is ongoing amidst what has become the soap opera backdrop of NOL’s trials and tribulations of massive losses in the non tanker sectors and the upheaval in its management. No less than five companies; Teekay, General Maritime, Overseas Shipholding Group (NYSE: OSG), Tsakos Energy Navigation (NYSE: TNP), Stena and Malaysian national carrier MISC are in the running for this $750m, 3m ton (or, as we say with a smile, $250/ton purchase). Most readers know that the potential sale of AET has been going on for years like a bad serial soap opera, but with the recent regime change within NOL combined with its massive losses and a good tanker market, we think that AET can be done this year and is likely done sooner rather than later.
Continue Reading
Written by:
carisk | Categories:
Uncategorized | March 1st, 2003 |
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We hear the irritation all the time: “Investment banks aren’t interested in the middle market – and they won’t even look at deals less than $100 million.” So, where does that leave an industry like shipping, which needs to have access to the capital markets especially when commercial bank capacity shrinks? We imagine the question would warm the cockles of the people at Jefferies in New York.
In an era when many investment banks would fire their employees before helping smaller companies in mature industries raise money, maritime business is so important to Jefferies that shipping deals appear by name in the firm’s corporate annual report. In a time when “shipping equity” is considered an oxymoron, Jefferies has been on the cover of every public equity deal in recent memory and is now offering shipowners private equity through the $600 million Jefferies Capital Partners, formerly called FS Private Equity. And in a moment when firms are letting people go, Jefferies have added such maritime names as Roy Furman, as Vice Chairman, Jim Dowling, in private equity and Stephen Gengaro, in equity research.
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Written by:
carisk | Categories:
Marine Money | July 1st, 2002 |
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By Matt McCleery with Nora Huvane, Marine Money Research
“‘Business Ethics’ does not have to be an oxymoron.”
Gretchen Morgenson, The New York Times
The bad news is that a crisis of confidence in Wall Street threatens the health of the global capital markets for years to come. Investors have lost faith in everything from analyst recommendations to audited financial statements to the credibility of company officers and directors. The damage could be huge. As we go to press, economic indicators tell us the United States economy is in a strong recovery but the stock market indices are steadily sinking to levels not seen in months. Poor valuations have halted capital formation, which has halted revenue growth and earnings. But the good news, at least for Marine Money readers, is that ship finance may benefit from it.
From opaque and off balance sheet energy trading at Enron to immature Internet technology, most of the flame-outs that have brought about the current market malaise have resulted from investors being unable to adequately understand the businesses they financed. Corporate deception was often enabled by investor inability to identify it.
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Written by:
carisk | Categories:
Marine Money,
People & Places | June 1st, 2002 |
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Recently we got a callfrom a loyal reader of Freshly Minted (FM) noting that while the data regarding the “New York Liquid Bulk Peers Share Performance” chart that has appeared in most editions of FM of late and has evolved over the year to include more and more data, was interesting but “What does it really mean”. Well, that reader knows who they are and in fact most weeks we get a call from this person and we love and encourage further feedback.
The initial response to the question of what the data means was one akin to “Make of it what you will.” We have produced estimates on a range of tanker companies and were hoping to give a basic knowledge of some of the share performance of the companies noted. However this combination comment/question resonated. While each contingent part of the data has relative and varying degrees of importance with each company, and is therefore a valuable piece of information, why have all the data and not at least try to benchmark it? Continue Reading
Written by:
afarrison | Categories:
Company News | April 1st, 2002 |
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