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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Written by: marinemoney | Categories: Marine Money | October 1st, 2010 | Add a Comment

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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Written by: carisk | Categories: Freshly Minted, Market Commentary | April 15th, 2010 | Add a Comment

Back in the Saddle

After what we perceived to be a long absence, we were pleased to see the return of Justin Yagerman at his new desk in Deutsche Bank. Mr. Yagerman leads the transportation and shipping team that includes Robert Salmon and Michael Webber. Coverage includes trucking, airfreight, logistics, railroads and, of course shipping.

On Wednesday, Mr. Yagerman initiated coverage of the sector. His main takeaway on shipping was: “near-term fundamentals challenging across the board, but high quality names should continue to outperform.”

Written by: carisk | Categories: Freshly Minted, Market Commentary | October 1st, 2009 | Add a Comment

Teekay Amends LNG Filing with 12x EBITDAValuation – Roadshow Next Week

Having released phenomenal 1Q05 earnings, announced a massive $225 million stock buyback, held a swinging bank meeting in Vegas and closed a dirt cheap credit facility, Teekay is now ready to hit the road to sell a 20% interest in Teekay LNG Partners LP next week. With this confluence of events, there is little doubt that TK will be a strong performing investment. In an amended filing submitted yesterday, TK filled in a critical blank – the price range – which is $20-$22. Looking at projected EBITDA of about $100 million in 2005, the new deal will be priced at about 12x cash flow assuming middle-range pricing. There are about six shipping deals set to IPO in the coming weeks and having a blue chip deal like this kick off, even though it is an MLP and the others aren’t, will set a good tone. Here’s the line-up for the Teekay LNG deal: Citigroup; UBS Investment Bank; A.G. Edwards; Raymond James; Jefferies & Company, Inc.; Wachovia Securities and Deutsche Bank Securities.

Written by: carisk | Categories: Equity, Freshly Minted | April 24th, 2005 | Add a Comment

Teekay shares or Teekay PEPS? An Investor’s Perspective

By Lambros Papaeconomou, of Mallory, Jones, Lynch, Flynn & Associates,

TK PEPS Main Characteristics

Borrower: Teekay Shipping Corporation

Security Type: PEPS

Total Amount Borrowed: $125,000,000

Unit Price: $25.00

Dividend: 7.25%

Date Interest Commences Accruing: February 16, 2003

1st Dividend Payable on: May 16, 2003

Maturity: May 16, 2006

Moody’s Rating: Ba3

S&P Rating: BB

Chart 1

Suppose on February 12, 2003 you were considering investing $25 for 3 years in Teekay Shipping (NYSE:TK). You could purchase either 0.6941 TK shares (stock symbol: TK) at $36.02 (the day’s closing price), or one TK Premium Equity Participating Security (TK PEPS) – (stock symbol: TK_PA), Teekay Shipping’s offering of convertible securities that was priced and sold that day. Would you invest in TK shares or TK PEPS? Under what circumstances would your investment in TK shares be more profitable than TK PEPS and vice versa? How were TK PEPS priced vis-à-vis TK shares? Did arbitrage opportunities exist? In this article we will attempt to answer above questions by analyzing, in depth, Teekay’s recent offering of convertible securities.

TK PEPS earn an annual dividend of 7.25% (or $1.8125 per unit) and are automatically converted into TK shares after 3 years as per the conversion formula described in Chart 2. TK shares earn an annual dividend of $0.86 per share which, at the purchase price of $36.02 per share, is equivalent to an annual dividend yield of 2.39 For a $25 capital investment, investors in TK shares would own 0.6941 shares that will pay them an annual dividend of $0.5969, whereas investors in TK PEPS would own one unit that will earn an annual dividend of $ 1.8125. Therefore investors in TK PEPS will earn an extra $1.2156 per annum. However, as described above and also shown in graph 1, the number and value of TK shares they will receive after 3 years could be the same or lower than those owned by investors in TK shares, and would depend on the stock price of TK shares after 3 years (referred to as “future stock price”).

Written by: afarrison | Categories: Marine Money | March 1st, 2003 | Add a Comment