Blowout!

As a seasoned issuer, Teekay Corporation wasted no in pricing what was expected to be $300 million of senior unsecured notes due in 2020. On Friday, not only did they announce highly competitive pricing, but also that the offering had been upsized by 50% to $450 million.

With a coupon of 8.5%, the deal was priced at 99.181% to yield 8.625% or 492 bps over like term Treasuries. Details of the transaction are shown in the Guts of the Deal below.

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Swap to Extend

On Tuesday, Teekay Corporation announced a cash tender offer for all of its outstanding 8.875% Senior Notes due 2011. As of December 31, 2009, $176.6 million aggregate principal amount of these notes were outstanding. The total consideration for the tender offer will be $1,078 per $1,000 principal amount, consisting of a tender offer premium of $60 and a consent payment of $18 for early tenders. The offer, managed by J.P. Morgan, is scheduled to expire February 9th.
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Not Just a Warm-up

Prior to the start of the festivities, Teekay Corporation held its successful shareholders meeting. The room was filled with over 100 spectators with another 200 viewing through the webcast. What was extremely interesting to hear from the Teekay delegation was the acknowledgement that they did not recognize many of the people in the room. Fresh blood!

The first session began under cloudy but dry skies an unusual event in New York these days. The room was packed with the audience hoping to glean insights from last year’s deal of the year winners as the architects of the transactions discussed their deals and how they fit in today’s marketplace. The discussion was led by Stephen Peepels of DLA Piper.
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Morgan Stanley II

Despite a pressing deadline, we couldn’t pass up the opportunity to get out of the office and attend Morgan Stanley’s 2nd Commodities and Shipping Conference. In these difficult times how could one possibly forego the opportunity to hear what Ole Slorer and his team have to say with the added benefit of gleaning some insights on the capital and lending markets. All interspersed with company presentations and lessons from Morgan Stanley’s commodities and freight trading experts. It is a rare opportunity for us to receive an invitation to these investor only meetings and we are most appreciative. Putting on an investor hat for a moment, we can confirm that if one is interested in the space there is no better way to get an education and gather information about this sector than attending these conferences. And, we did not even benefit from having a one-on-one meeting.

Wiley Griffiths, the Head of Global Shipping, and his team started us off with a view of what was happening in the market. Continuing historic trends, the markets as always remain interesting.

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Dividends Anyone?

With the recent collapse of both commodity prices and the BDI, share prices, particularly on the dry side, quickly followed suit. A decline in share price is never good news, but for the high paying dividend companies it was a double-edged sword. As yield and share price track inversely, the nominal dividends on these shares now equate to extraordinary yields. The whispered question on the street is whether the high dividend paying companies, given the poor market and lack of liquidity, will cut their dividends. Thus far two companies have answered this week with a resounding no. OceanFreight declared its 3rd quarter dividend at the current level. And demonstrating even greater confidence, Navios Maritime Partners increased its 3rd quarter dividend by 10% and announced that the 4th quarter dividend would also be increased by a further 4%.
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I.M. Skaugen & Teekay LNG Partner in $90 million Lease Deal

The market moves, liquidity returns, but things have changed. Forty two percent of bankers who responded to our annual survey last month believe that a reasonable advance rate for a charterfree newbuilding is under 60%. Another 46% believe the rate should be under 70%. This leaves most owners without an attractive and high quality charter left to come up with 30-50% of newbuilding costs in equity. Taking into account how high ship values have gotten, that means even strong owners with significant newbuilding programs need to think creatively about how best to raise the equity they need if they don’t wish to resell their newbuilding contracts.

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