Cautious Mood at Marine Money Asia Week, Singapore

Marine Money Asia week closed last week on a somewhat cautious note, as over 490 participants went home with a less optimistic outlook on the shipping markets, global economy and banking sectors compared to a year before. The message we came away with is that caution rules with difficult shipping markets projected over the next two years which leads to tightening of financing and challenging operational conditions. Demand remains robust but simply overwhelmed by the supply of new vessels and the real “risk” factor of excessive shipyard capacity. Those with access to capital may be able to identify attractive investment potential but structured deals with strong counter parties and term employment are the ingredients in demand.

From Dr. Marc Faber’s assertions that money value is controlled by evil governments from the very beginning and we should all consider holding a little gold in our personal portfolio, to worrisome comments on the European banking crisis and the possible repercussions that it could have on ship financing in this part of the world, and a public comment made by NordLB’s Dr. Klaus Stoltenberg that European banks should expect to own more vessels themselves, there are really not many bright spots in the world we live in today, save offshore oil and gas and LNG sectors. Continue Reading

Success But at a Price – Box Ships’ IPO

Following quickly on the heels of the Golar LNG Partners LP offering, Box Ships Inc., a wholly owned subsidiary of Paragon Shipping Inc. became the second IPO of the year.  Approximately three weeks ago, the company filed a registration statement to sell 10 million shares of the common stock of the company, leaving Paragon with a 22.7% stake. The sale would include a green shoe of a further 1.5 million shares. Pricing was expected to be between $15 and $17 per share and assuming midpoint pricing, gross proceeds would be $160 million. The net proceeds of the offering would be used to partially fund the acquisition of an initial fleet of six containerships, including three being acquired from Paragon, with an aggregate capacity of 28,177 TEU.

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Doesn’t Get Better – Hapag Lloyd Offering Upsized and Trades Up at the BreakImproving Leverage While Increasing Liquidity – Teekay Tanker Follow-On

Initially targeting $500 million in a two tranche offering of Euro and Dollar bonds, Hapag Lloyd benefited from strong investor appetite and upsized it’s offering by EUR 145 million ($200 million) an increase of 40%. In terms of final numbers, Hapag issued EUR 330 million of 9.5% 5-year Euro notes and $250 million of 9.75% 7-year Dollar notes.

The Euro notes and Dollar notes were issued at 99.5% and 99.37% respectively to yield 9.55% and 9.875%. At the break, both senior notes traded up at around 103.5%.

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A Rising Tide Not Only Lifts All Boats, But Also Allows a Recapitalization and Perhaps Even an Exit

Last week, Hapag-Lloyd began marketing a $500 million bond issue in Europe and the U.S. to qualified investors, as part of a debt re-structuring, which will most importantly, stabilize the company’s balance sheet. The company intends to issue $500 million in the aggregate of senior unsecured notes, which will consist of a combination of dollar denominated notes due in 2017 and Euro denominated notes due in 2015. The notes will be guaranteed on a senior basis by “Albert Ballin” Holding, the shareholding entity. Initially, the proceeds of the notes will be escrowed and released only upon the receipt by the company of a minimum of $290 million of proceeds from the K-sure financing (Ex-Im financing, guaranteed by the Korea Trade Insurance Company, for the acquisition of 6 x 8,749 TEU containerships to be built at Hyundai).  More details, based upon the preliminary prospectus and market talk, are provided in our Guts of the Deal herein.

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A Bellwether?

The bond market is getting better. As we saw with the Hornbeck bond last month, spreads and trends are improving. The economy seems to be bottoming out and with an improving economy and inflation fears increasing interest rates should follow. The timing for an offering seemed propitious then as it does now.

It was therefore no surprise that Seacor Holdings Inc. (“Seacor”) became one of the first NY-listed “shipping” companies to issue bonds this week when it priced and sold $250 million of 7.375% Senior Notes due in 2019. The issue was priced at 99.239% to yield 7.471%, reflective of the current market and at a much better rate then would have been achievable 6 months ago. This equates to 400 bps spread over like term Treasuries.  The issue was well received and several times oversubscribed and despite requests to upsize the deal, Seacor was satisfied at the current level.

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