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TEN Tops the Charts – 17 years of profits!
Nick Tsakos and Michael Jolliffe deserve to have some fun. They have earned it for themselves and their shareholders for their consistent performance during the past 17 years since TEN, in a slightly different stage of development, first listed on the Oslo Bors.
You will excuse us if a bit of editorial pride fills these lines because their launch back then coincided with Marine Money’s early belief that good management would build real value for shareholders and themselves in concert with the capital markets and the public ones specifically.
Written by: carisk | Categories: Freshly Minted, The Week in Review | April 15th, 2010 | Add a Comment
Life on the Road
Following on the heels of a conference-filled week, public shipping company management eams such as those at StealthGas and TEN continued to develop their profiles and build their relationships with analysts and investors. Harry Vafias and Andrew Simmons of StealthGas opened the Nasdaq on Wednesday morning. Isabella Schidrich and her team at the Nasdaq celebrated StealthGas’ incredible growth story and presented Mr. Vafias with a special crystal for being the youngest CEO of a public shipping company in the world – and a successful company at that.
Written by: carisk | Categories: Freshly Minted, Market Commentary | March 27th, 2008 | Add a Comment
TMI?
What a week for investors! Starting with CMA’s annual event, continuing with JPMorgan’s Conference and concluding with the Capital Link Forum, it is conceivable that even the most interested observer of the industry may have suffered from information overload. Thankfully, with Good Friday, many of us had the opportunity to recover with a long-weekend.
Despite the early start, the Capital Link Forum played to a full house. There were company presentations galore interspersed with lively and informative panel discussions. With far too much information to distill, here is a highly selected compendium of our outtakes.
Written by: carisk | Categories: Freshly Minted, Market Commentary | March 27th, 2008 | Add a Comment
Why Capital Maritime Pulled its IPO – What it Means
Evangelos Marinakis had the world of shipping and capital markets contemplating and strategizing after Capital Maritime’s decision to withdraw its 16.7 million share IPO during pricing on Monday night. Goldman led the deal, while Bear Stearns and Jefferies played supporting roles as co-managers. With deals for Genco, Quintana, Wexford, and others confidentially filed by foreign issuers in the process of coming to market, Capital’s decision to pull has been a reality check for both issuers and underwriters that valuations are coming under increasing pressure with every new deal that comes to market, irrespective of the quality of the fleet and corporate structure.
Dissecting the Deal – Lessons Learned
Ironically, the factors that most influenced the pulling of this deal were determined before the company jumped on the first private jet out of Teterboro: the price range and the corporate structure. As we understand it, a solid group of blue chip institutional investors liked the Capital deal, especially in light of the fundamentals for the product tankers that Capital has on order. However, they became very focused on the price relative to the range.
Set the Range High and Negotiate Down
Unlike Eagle, which went to market at about 180% of net asset value and therefore had a lot of room to negotiate with investors, Capital was boxed in from the start. Goldman advised the company to put a very reasonable price on the cover of the red herring at $14-$16 (5.3x-5.8x EBITDA), hoping that investors would place enough market orders (which do not specify the price) to push the stock to the high end of the range or above it.
Unfortunately, since investors recently had their way with Aries, TBS and Eagle, they put in limit orders (which state a firm price) at $13 – or $2 below the range. The problem was that with a net asset value of about $15/share, Capital had little room to be negotiated down. This inflexibility was compounded by the fact that Evangelos Marinakis put his entire family fleet and management company into the public vehicle, making the impact of a dilutive deal even greater.
Don’t Offer Newbuildings If You Won’t Get Valuation Credit
Yield deals like Diana, Aries and Eagle were able to tap an investor community that focuses on valuations such as Price/EBITDA and dividend yield. However, Capital had much of its net worth in newbuilding contracts (which produce negative cash flow until the ships deliver) and therefore put the company squarely into the world of value – net asset value in this case – which allowed investors to feel they possessed the upper hand. This is not a new phenomenon; TEN has also struggled to have its fantastic newbuilding program assigned a fair value.
Keep It Simple
As superficial and shallow as it sounds, valuing the Capital fleet may have been more time consuming for investors than expected. As of June 3, 2005, the company’s existing fleet was comprised of 39 vessels of which twenty-six are product tankers, four are OBOs and nine are bulk carriers. In addition, Capital currently has 16 Ice Class 1A MR product tanker newbuildings on firm order, which are scheduled for delivery in January 2006 through November 2007. These tanker newbuildings have an aggregate carrying capacity of 665,500 deadweight tons and currently comprise the largest fleet of this type and size on order in the world. As sad as it sounds, valuing Capital’s fleet, which has a wide range of ages and types, may have required more of a commitment than the average value investor wanted to make.
Like many good deals, the sellers didn’t need the money, and indeed may have been disgusted by the way future partners valued the company after the efforts made to construct a first class investment opportunity. All in all, this was a good deal and it is a disappointment that it didn’t get completed. In the end, we think it is the investors who have lost out here. Although every deal seems to influence the next one, we do not think the pulling of this deal will have a major impact on future shipping IPOs – so long as issuers go into the market with reasonable expectations. The fact remains that at today’s high net asset values, issuing a minority interest in equity at even a slight premium is a very attractive proposition.
Why Capital Maritime Pulled its IPO – What it Means
Evangelos Marinakis had the world of shipping and capital markets contemplating and strategizing after Capital Maritime’s decision to withdraw its 16.7 million share IPO during pricing on Monday night. Goldman led the deal while Bear Stearns and Jefferies played supporting roles as co-managers. With deals for Genco, Quintana, Wexford, and others confidentially filed by foreign issuers in the process of coming to market, Capital’s decision to pull has been a reality check for both issuers and underwriters that valuations are coming under increasing pressure with every new deal that comes to market, irrespective of the quality of the fleet and corporate structure.
Dissecting the Deal – Lessons Learned
Ironically, the factors that most influenced the pulling of this deal were determined before the company jumped on the first private jet out of Teterboro: the price range and the corporate structure. As we understand it, a solid group of blue chip institutional investors liked the Capital deal, especially in light of the fundamentals for the product tankers that Capital has on order. However, they became very focused on the price relative to the range.
Set the Range High and Negotiate Down
Unlike Eagle, which went to market at about 180% of net asset value and therefore had a lot of room to negotiate with investors, Capital was boxed in from the start. Goldman advised the company to put a very reasonable price on the cover of the red herring at $14-$16 (5.3x-5.8x EBITDA), hoping that investors would place enough market orders (which do not specify the price) to push the stock to the high end of the range or above it.
Unfortunately, since investors recently had their way with Aries, TBS and Eagle, they put in limit orders (which state a firm price) at $13 – or $2 below the range. The problem was that with a net asset value of about $15/share, Capital had little room to be negotiated down. This inflexibility was compounded by the fact that Evangelos Marinakis put his entire family fleet and management company into the public vehicle, making the impact of a dilutive deal even greater.
Don’t Offer Newbuildings If You Won’t Get Valuation Credit
Yield deals like Diana, Aries and Eagle were able to tap an investor community that focuses on valuations such as Price/EBITDA and dividend yield. However, Capital had much of its net worth in newbuilding contracts (which produce negative cash flow until the ships deliver) and therefore put the company squarely into the world of value – net asset value in this case – which allowed investors to feel they possessed the upper hand. This is not a new phenomenon; TEN has also struggled to have its fantastic newbuilding program assigned a fair value.
Keep It Simple
As superficial and shallow as it sounds, valuing the Capital fleet may have been more time consuming for investors than expected. As of June 3, 2005, the company’s existing fleet was comprised of 39 vessels of which twenty-six are product tankers, four are OBOs and nine are bulk carriers. In addition, Capital currently has 16 Ice Class 1A MR product tanker newbuildings on firm order, which are scheduled for delivery in January 2006 through November 2007. These tanker newbuildings have an aggregate carrying capacity of 665,500 deadweight tons and currently comprise the largest fleet of this type and size on order in the world. As sad as it sounds, valuing Capital’s fleet, which has a wide range of ages and types, may have required more of a commitment than the average value investor wanted to make.
Like many good deals, the sellers didn’t need the money, and indeed may have been disgusted by the way future partners valued the company after the efforts made to construct a first class investment opportunity. All in all, this was a good deal and it is a disappointment that it didn’t get completed. In the end, we think it is the investors who have lost out here. Although every deal seems to influence the next one, we do not think the pulling of this deal will have a major impact on future shipping IPOs – so long as issuers go into the market with reasonable expectations. The fact remains that at today’s high net asset values, issuing a minority interest in equity at even a slight premium is a very attractive proposition.
Shipowners Present at Deutsche Small Cap Equity Conference
Shipowners Present at Deutsche Small Cap Equity Conference
It’s no coincidence that investor conferences are being held in closer to the equator during these chilly months. This week, Deutsche Bank, which recently hired investment banker Craig Fuehrer from JP Morgan and veteran transportation analyst Jordan Alliger from Lazard (formerly with Goldman Sachs), held an event at the Ritz Carlton on the beach in Naples, Florida. Shipping companies that presented include: Kirby Corporation (NYSE: KEX), OMI (NYSE: OMM), General Maritime (NYSE: GMR), TEN (NYSE: TNP), Stolt Nielsen, S.A. (NASDAQ: SNSA) and Maritrans (NYSE: TUG). As you can see from the share price graphs for the last five days, with fundamentals as good as the shipping industry, it’s always a good idea for companies to get out on the road and tell their story to investors.
It’s no coincidence that investor conferences are being held in closer to the equator during these chilly months. This week, Deutsche Bank, which recently hired investment banker Craig Fuehrer from JP Morgan and veteran transportation analyst Jordan Alliger from Lazard (formerly with Goldman Sachs), held an event at the Ritz Carlton on the beach in Naples, Florida. Shipping companies that presented include: Kirby Corporation (NYSE: KEX), OMI (NYSE: OMM), General Maritime (NYSE: GMR), TEN (NYSE: TNP), Stolt Nielsen, S.A. (NASDAQ: SNSA) and Maritrans (NYSE: TUG). As you can see from the share price graphs for the last five days, with fundamentals as good as the shipping industry, it’s always a good idea for companies to get out on the road and tell their story to investors.
Correction
Correction
In the last week’s Freshly Minted, we incorrectly characterized Tsakos Shipping & Trading as a private company controlled by TEN.
We have been contacted by TEN representatives, who clarified that Tsakos Shipping & Trading is a completely private independent organization which manages TEN’s vessels but is totally separate from TEN. Tsakos family interests control TST and own less than a quarter of TEN’s shares. Apart from common managers, there is absolutely no relationship between TEN and the vessel Athos I and, correspondingly, no liability for damage on the part of TEN.
In the last week’s Freshly Minted, we incorrectly characterized Tsakos Shipping & Trading as a private company controlled by TEN.
We have been contacted by TEN representatives, who clarified that Tsakos Shipping & Trading is a completely private independent organization which manages TEN’s vessels but is totally separate from TEN. Tsakos family interests control TST and own less than a quarter of TEN’s shares. Apart from common managers, there is absolutely no relationship between TEN and the vessel Athos I and, correspondingly, no liability for damage on the part of TEN.
When Listing Companies Have Accidents
When Listing Companies Have Accidents
It has been an unusually active month for incidents involving vessels owned by shipping companies that are public, related to public companies and planning to go public.
First came the Athos I, a panamax tanker that on November 26th, the Friday after Thanksgiving, struck a submerged object punching two holes in the cargo and ballast tank ultimately releasing a still unknown quantity of crude oil as it was being maneuvered to a dock at the Citgo terminal on the Delaware River in Philadelphia. The incident has already exceeded the $45 million of $1200 per grt liability limit under OPA and many claims have not yet been filed. The ship’s manager was Tsakos Shipping and Trading, a private company controlled by the Tsakos family but completely separate from NYSE-listed TEN.
Next, on December 2nd, a 1998-built panamax bulker named Selendang Ayu lost power while in transit from Tacoma to China with a cargo of soybeans and ended up breaking up on the rocks on the west coast of Unalaska Island. The Coast Guard rescue effort resulted in the loss of six seafarers’ lives. The bow has now sunk while the stern remains aground and salvors are still working to remove diesel and bunkers from the stern. There are confirmed reports that about 40,000 gallons of oil have been lost, though the vessel had about 424,000 gallons on board.
The Selendang Ayu is part of the 14-vessel bulker fleet owned by Global Maritime Ventures (GMV), a joint venture between the Malaysian Government and the Tsao family’s IMC, which has a minority interest and serves as the vessel’s commercial manager. GMV, like Malaysian Bulk Carriers, is a joint venture created through Malaysian Development Bank, Bank Industri & Teknologi Malaysia, and the private sector in an effort to boost the country’s international maritime industry. MBC, which was a joint venture between the Kuok family and the Malaysian Government, went public in 2004.
IMC is planning a massive $400 million equity offering on the Singapore Stock Exchange during the first half of 2005 through lead underwriter Goldman Sachs and BNP Paribas. IMC was previously listed in Hong Kong (primary) and Singapore (secondary) but took the company private in 2002 when investor interest in bulk shipping companies was anemic.
Finally, this week, the 1992 built, 96,000dwt doubled hulled aframax Tsunami, owned by George Economou, collided with a terminal pier on the Mississippi River. The incident has resulted in the spillage of a minor amount of caustic soda but fortunately the three-foot puncture in the vessel did not pierce the inner hull containing the nearly 90,000 tons of cargo and bunkers on board. The Tsunami is not part of the fleet of ships that is being offered to the public beginning next week in an IPO lead underwritten by investment bank Cantor Fitzgerald, but Economou’s connection to the ship is well known.
It has been an unusually active month for incidents involving vessels owned by shipping companies that are public, related to public companies and planning to go public.
First came the Athos I, a panamax tanker that on November 26th, the Friday after Thanksgiving, struck a submerged object punching two holes in the cargo and ballast tank ultimately releasing a still unknown quantity of crude oil as it was being maneuvered to a dock at the Citgo terminal on the Delaware River in Philadelphia. The incident has already exceeded the $45 million of $1200 per grt liability limit under OPA and many claims have not yet been filed. The ship’s manager was Tsakos Shipping and Trading, a private company controlled by the Tsakos family but completely separate from NYSE-listed TEN.
Next, on December 2nd, a 1998-built panamax bulker named Selendang Ayu lost power while in transit from Tacoma to China with a cargo of soybeans and ended up breaking up on the rocks on the west coast of Unalaska Island. The Coast Guard rescue effort resulted in the loss of six seafarers’ lives. The bow has now sunk while the stern remains aground and salvors are still working to remove diesel and bunkers from the stern. There are confirmed reports that about 40,000 gallons of oil have been lost, though the vessel had about 424,000 gallons on board.
The Selendang Ayu is part of the 14-vessel bulker fleet owned by Global Maritime Ventures (GMV), a joint venture between the Malaysian Government and the Tsao family’s IMC, which has a minority interest and serves as the vessel’s commercial manager. GMV, like Malaysian Bulk Carriers, is a joint venture created through Malaysian Development Bank, Bank Industri & Teknologi Malaysia, and the private sector in an effort to boost the country’s international maritime industry. MBC, which was a joint venture between the Kuok family and the Malaysian Government, went public in 2004.
IMC is planning a massive $400 million equity offering on the Singapore Stock Exchange during the first half of 2005 through lead underwriter Goldman Sachs and BNP Paribas. IMC was previously listed in Hong Kong (primary) and Singapore (secondary) but took the company private in 2002 when investor interest in bulk shipping companies was anemic.
Finally, this week, the 1992 built, 96,000dwt doubled hulled aframax Tsunami, owned by George Economou, collided with a terminal pier on the Mississippi River. The incident has resulted in the spillage of a minor amount of caustic soda but fortunately the three-foot puncture in the vessel did not pierce the inner hull containing the nearly 90,000 tons of cargo and bunkers on board. The Tsunami is not part of the fleet of ships that is being offered to the public beginning next week in an IPO lead underwritten by investment bank Cantor Fitzgerald, but Economou’s connection to the ship is well known.
What Ship Accidents Mean to Shipping Investors
What do these kinds of incidents mean to investors in the public or soon to be public companies that own the vessels? The answer from capital markets professionals in New York is clear – very little. To shed light on the potential implications of taking a company public that has the contingent liability of an environmental incident not yet quantified, we asked Glen Oxton, a partner at premier New York maritime law firm Healy and Baillie, John Sinders, Managing Director of leading maritime investment bank Jefferies, and Gary Wolfe, partner at Seward & Kissel, the most active law firm doing securities work on behalf of shipowners, for their views on the subject.
Oxton, Wolfe and Sinders Share Their Views
“For all practical purposes, there really is no issue here,” Oxton said. “Standard P&I coverage for non-tank vessels is $1 billion, and unless the incident has been catastrophic, the settlements and judgments should not reach into the equity value of the listing company,” he added. “Although investors shouldn’t worry that the company will soon be driven into bankruptcy by claims, the one real potential economic repercussion is that the company’s insurance rates will rise because of the loss, but that is likely to be it.”
Gary Wolfe echoed the sentiment; “with the exception of the Exxon Valdez, there has never been an environmental incident resulting from a vessel that has exceeded the then available P&I coverage – not Sea Empress, not Amoco Cadiz, none of them. Besides which, if the company is structured properly, the liability should be contained at the subsidiary vessel owning level. That means that you might lose the vessel, but not the whole fleet in case of an oil spill catastrophe,” Wolfe said.
John Sinders agreed. “It’s really just a marketing issue. Unless an incident brings to light the advanced age of the vessel or fleet or a pattern of poor quality commercial management, it’s really not very meaningful.” When asked how he would handle an accident like the Selendang Ayu, which at worst is only 1/10th of the size of Valdez and may be much less, Sinders said he would pause, but only briefly. “I would encourage a company that plans a listing to wait to go to market until the response community has a feel for the scope of the damage. After that, the company will be judged on the manner in which it responds and this will be clear from their actions. The reality is that although it happens very rarely, ships, like airplanes, sometimes have accidents; it’s how infrequently they occur and how you deal with them that defines a company.”
Jefferies Finds Equity in New York
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.
TURNING POINTS
By Matt McCleery
According to my wife “life is short so eat dessert first.” This philosophy, while often puzzling to wait-staff, epitomizes a philosophy to which I now subscribe. It boils down to three words: good news first. So here it is: Tsakos Energy Navigation issued 6.5 million shares at $15 apiece and the deal marked a turning point in capital markets ship finance.
I don’t mean to be dramatic, but the Tsakos deal really is very meaningful. First, it clears up any lingering question of whether the US Capital markets are willing to finally forgive and forget failed high yield deals. Second, the TEN deal is an example of the fact that investors view a shipowners’ long-term employment profile as being just as important as owning lots of ships in the same size category. This means that for companies with a basket of charters, the IPO “window” may not be as tough to squeeze through as otherwise thought. Finally, while currently fully priced realtive to its peers, the TEN IPO was sold into a weak tanker market and therefore has the potential to spawn a class of professional investors that will make money in shipping on their first go. Lest anyone underestimate the goodwill generated by Stelmar, a top performing IPO in 2001. Continue Reading
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