The Right Product for the Right Time – Teekay Offshore Follow-on

Last week, the Wall Street Journal reported on the “Frenzy in Energy Partnerships”. “Lured by hefty yields, investors are pouring billions of dollars into a small corner of the stock market – energy focused master limited partnerships – which has seen a huge rally of 15% this year.” This has caused concern, as these gains are not the result of a meaningful change in fundamentals but simply the consequence of a rush of new money into the sector. This should come as no surprise as investors seek safe havens for their cash and, in this instance, are rewarded with yields, a portion of which may be tax free, well in excess of Treasuries.
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An Unexpected Twist

In a bizarre turn of events, New Century Shipbuilding (“NCS”) has canned its listing plans in Singapore on eve of pricing, citing tough market conditions. The Business Times in Singapore reported today that there is more to the sudden IPO pull-out than meets the eye. The largest privately owned shipbuilder in China is now accused of misleading investors through material inaccuracies contained in its prospectus. Quoting unnamed sources, a complaint made to the Singapore Exchange pointed out that the shipbuilder had failed to disclose that two shipbuilding contracts for Sino Noble worth USD 180 million had been terminated late last year and were wrongly listed as part of its outstanding orderbook. NCS had also failed to mention the legal claim amounting to USD 60 million that Sino Noble is currently claiming against the shipbuilder.

The company could face criminal action from the Monetary Authority of Singapore if found guilty of making false and misleading statements. According to its prospectus, its orderbook has an aggregate value of USD 5.2 billion as at 31 March 2010 and included orders for 83 vessels with a combined tonnage of approximately 10.8 million dwt to be delivered between 2010 and 2012. We are absolutely baffled by NCS’ non-disclosure in consideration that the two disputed contracts with Sino Noble accounted for only 3.5% of its total orderbook. There appear to be hardly sufficient reasons to place the IPO in jeopardy by not being transparent in this regard. Continue Reading

Wall Street We Have a Problem

Like a phoenix arising from the ashes of U.S. Shipping Partners L.P., American Petroleum Tankers Holding LLC (“APT”) has come to the market offering $275 million First Priority Senior Secured Notes due in 2015. The company’s equity sponsors, Blackstone (75%) and Cerberus (25%) intend to use the proceeds of the offering to escrow  $169.9 million for the construction and acquisition of the last two of five 49,000 DWT product tankers ordered at NASSCO, the M/T Empire State and M/T Evergreen State, to refinance the existing senior secured loan facility of $96.6 million and pay $8.5 million in transaction fees and expenses. The notes are rated B1 and B+, highly speculative, by Moody’s and S&P respectively.

The company’s fleet of five product carriers is the youngest in the Jones Act Fleet. The first three vessels, Golden State, Pelican State and Sunshine State, are chartered to major oil companies, BP, Marathon and Chevron respectively with the last two to be delivered upon completion to the Military Sealift Command (“MSC”). The charter terms vary with the Golden State and Pelican State on 7-year and 3-year charters respectively. The Sunshine State is on a 9-month charter and, as is typical with the MSC, the last two vessels are on 1-year charters with annual options to avoid a full five-year commitment. The five-year tenor of the notes likely reflects the charter profile.
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Insatiable!

Investors cannot seem to be able to get enough of the shares and bonds of Teekay and its subsidiaries. In the latest iteration, Teekay Tankers announced Monday, after market close, its intention to offer 7 million shares of Class “A” common stock of the company in a public offering. But even before the market opened the next day, the company announced that the offering had been increased to 7.7 million shares, following the trend of Teekay’s previous offerings.

With the joint bookrunners, UBS, Citi, J.P. Morgan and Deutsche Bank opening up their retail systems, the bulk (75% to 80%) was covered by retail with the balance covered by institutions. In a world of low interest rates, a consistent dividend payer is a star.
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Mr. Molaris Returns with Alma – A Mixed Fleet and Fixed Dividend Option

Last week, Stamatis Molaris staged his return to the public markets by joining forces with Hans Mende, the President of American Metals & Coal International, and Mass Capital Investments, a private equity firm affiliated with Fortis Bank Nederland, with the filing for an IPO of their new venture, Alma Maritime Limited. Avoiding the historic trend of a pure play in order to provide diversification, Alma will be a mixed fleet with mixed employment including spot, short-term, medium term and long-term charters. The strategy is to take advantage of attractive opportunities presented by current low vessel prices in both the wet and dry sectors with the goal of maximizing shareholder returns through the shipping cycle.
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Here Come the IPOs

This week two IPOs, one dry and one wet, hit the road with well-known sponsors. First was the Genco inspired BDI play, Baltic Trading Limited, which was followed by Mr. Marinakis’, of Capital Products Partners fame, large tanker vehicle, Crude Carriers Corp. These followed quickly on the heels of the recent Scorpio offering.

BDI Proxy
This was one of the first opportunities we had to watch a road show presentation on the great equalizer, “RetailRoadshow” (http://www.retailroadshow.com/index.asp), a website designed to put retail investors on a level playing field with the institutions. The presentation of Baltic Trading Limited was expertly handled, as one would expect, by Peter G. and John Wobensmith, who will respectively fill the positions of Chairman and President of the new company.
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Equity Appetite Remains Strong

On Monday, Capital Product Partners announced that it planned to offer 5.8 million common units in a public offering. The transaction was priced the next day at $8.85 per common unit ,a discount of 6.25% from the prior day’s closing price. Proceeds will be used to acquire the M/T Atrotos, a 48,000 DWT product carrier built in 2007 from its sponsor, Capital Maritime & Trading, for $43 million and for general corporate purposes. Chartered  to Arrendadora Ocean Mexicana for $19,900 net per day, the vessel is sub-chartered to Petroleos Mexicana for five years. Operating costs for the period are fixed at $3,575 per day, which is a very competitive cost even for a modern ship.
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Teekay LNG goes to the Shelf

Having filed its F-3 shelf registration on October 20th (effective on the 29th), Teekay LNG Partners wasted no time and announced on Monday the offering of 3.5 million common units with a green shoe of a further 525,000 shares. On Tuesday the company announced that the shares were priced at $24.40, which is a discount of about 5% to Monday’s close at $25.67 just before the announcement.
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All Eyes Are On Genmar

We know that General Maritime’s dynamic duo, Messrs Georgiopoulos and Pribor are on the road marketing their $300 million senior unsecured notes offering due in 2017 and so, while they are busy selling we thought we would take a read of the high yield market.

Earlier this week, Navios Maritime Holdings closed its successful $400 million private offering of first priority ship mortgage notes due in 2017. Rated BB-/Ba3, the coupon on the notes was 8.875% and was priced to yield 9.125%. The company escrowed $105 million of the proceeds to provide additional financing to complete the purchase of two new vessels with the balance used to repay existing credit facilities.
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DnB NOR Markets Hires New Analyst

Kelvin Li has just joined the Corporate Finance team at DnB NOR markets as an analyst. He had a year’s working experience at UBS Investment Bank in New York as an analyst with the investment banking team. Kelvin holds a Bachelor of Business Administration (Higher Distinction) from the Ross School of Business at the University of Michigan, Ann Arbor.