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Transocean goes All-In Raising $1.08 billion in Equity and $2.5 billion in Debt
During the last days of November, Transocean Ltd re-jiggered its balance sheet through an equity follow-on offering and the issuance of serial bonds. First up was the follow-on offering for 26 million shares with a green shoe of a further 3.9 million shares. The offering was priced, through an accelerated bookbuilding process, at $40.50/share (based upon an exchange rate of CHF 0.9215/USD), a discount of 11.8% from the prior day’s closing price when the offering was announced. Proceeds of the share offering will be used to partially re-finance the company’s acquisition of Aker Drilling ASA, which was originally financed from cash and assumption of Aker’s outstanding debt. The replenished cash will be applied to the expected repurchase of approximately $1.7 billion of its 1.5% Series B Convertible Senior Notes due 2037 that holders may require it to re-purchase in December 2011. Barclays Capital and Credit Suisse acted as joint book-running managers of the offering.
Financing Newbuild Program #5 – Hornbeck Taps Equity Markets
On November 7th, Hornbeck Offshore Services Inc. announced its plans to build 16 U.S. flagged 300 class DP2 new generation offshore supply vessels, with options to build a further 16 for its upstream business. Exclusive of construction period interest, the aggregate cost of the first 16 vessels is estimated to be $720 million with deliveries scheduled during 2013 and 2014, which coincides with the delivery of approximately 145 incremental floaters and high specification jack-up rigs. The order was split equally between VT Halter Marine and Eastern Shipbuilding Group. This newbuilding program is the company’s eighth since its inception in 1997 and the fifth involving state of the art technologically advanced new generation OSVs.
Constructed with the increased demands of its deepwater and ultra-deepwater customers in mind, the new design offers double the deadweight capacity and more than doubles the liquid mud capacity of its predecessor 240 class, while maintaining an overall size that maximizes the efficiency from an operating cost perspective. While the vessels will be built in the U.S. which qualifies them for the coastwise trade in the Gulf of Mexico (“GoM”) under the Jones Act, the vessels will be deployed in the company’s core geographic markets of the GoM, Brazil and Mexico.
Trailer Bridge – 11 also in its Future
On Wednesday, Trailer Bridge, Inc., unable to resolve its creditor issues, voluntarily filed for Chapter 11 in the Bankruptcy Court for the Middle District of Florida. The filing came one day after it’s $89.5 million of 9.25% Senior Secured Notes came due, likely triggering cross defaults in the Wells Fargo term loan of $4.4 million, the revolver also with Wells Fargo of approximately $5.9 million, the $5.1 million of 7.07% MARAD Bonds due in 2022 and $8.6 million of 6.52% MARAD bonds due in 2023. The company believes this action was the quickest and most efficient way to restructure its balance sheet and ensure the long-term strength of its operations.
What Are We Missing? – Horizon Lines’ Recapitalization
Without a doubt, Horizon Lines was in difficult straits. With refinancing risk related to the $330 million of its 4.25% convertible senior notes (“Convertible Notes”) and bank debt, both due in 2012, poor financial performance, anti-trust issues and potential de-listing, the company was fighting fires on all fronts. But after much travail, the company announced that it had reached an agreement with the Convertible Note holders for a complete refinancing of the company’s entire capital structure, eliminating the re-financing risk, while hopefully putting the company on sounder footing going forward.
As of the end of the 2nd quarter, the company had total debt of $600.4 million the bulk of which is classified as current due to non-compliance with covenants. The debt consists mainly of 319.2 million of the Convertible Notes and $272.9 million of bank debt split between a term loan ($84.4 million) and a revolver ($188.5 million), against $1.5 million of total equity.
K-Sea Financing in Place – Kirby Taps Banks
On the last day of May, Kirby Corporation entered into a $540 million five-year unsecured floating rate term loan facility led by Wells Fargo, BofA Merrill Lynch and J.P. Morgan. Lenders include BTMU, Branch Banking & Trust Company, Compass Bank, RBS, U.S. Bank, Amegy Bank, Bank of Texas, Comerica, Keybank, Mizuho, Northern Trust and Royal Bank of Canada. Proceeds of the loan will be to provide financing for Kirby’s acquisition of K-Sea Transportation Partners L.P., with the amount drawn dependent on the final breakdown of the merger consideration between stock and cash.
Partial Spin-Off to Follow-on – Diana Container Raises Equity
Back in December, Diana Shipping Inc. spun off 80% of its 55% interest in Diana Containerships Inc. by distributing to its shareholders 2,667,066 shares. The shares began to trade on NASDAQ in January of this year.
Subsequently, on May 9th, Diana Containerships filed an F-1 registration statement for a follow-on offering of common shares. The shares closed that day at $12.64 per share. On May 31st, the company filed a press release announcing a follow-on offering of 14 million shares and a concurrent $20 million private placement of common shares to Diana Shipping. The offering, which was upsized to 14.25 million shares due to investor interest, was priced on June 10th at $7.50/share, a 27% discount from the closing price the day of the public announcement. While substantial, it needs to be put in context. On May 2nd the Dow Jones Industrial Index hit a recent high of 12,807.36, which began a steady six week market decline, its longest slump since 2002. This was certainly not a propitious moment for an equity offering. In fact from the date of filing to the date of pricing the market as measured by the DJI fell 5.8%. If in fact the window for equity offerings was open it must have been barely a crack with investors clamoring for a substantial discount given the falling market and only being receptive, in this instance, because of the good name attached to the deal.
Better than Equity? – SeaCube Raises $50 Million from Unexpected Source
Last week, SeaCube Container Leasing Ltd. announced the successful closing of a $50 million unsecured term loan with Wells Fargo, as administrative agent, and Apollo Investment Corporation, as sole lead arranger. The loan matures on April 28, 2016 and bears interest at 11%. Proceeds will be used to purchase containers and for other general corporate purposes. The loan will be guaranteed by all of its subsidiaries, including Container Leasing International LLC, the main operating company.
Equity Sales Continue – Navios Maritime Partners and Safe Bulkers Follow-on
While the Golar LNG Partners IPO was a surprise, the prevalence of follow-on offering is not. Last week, Teekay LNG and Navios Maritime Partners LP (“Navios Partners”) successfully concluded their offerings and they were joined this week by Safe Bulkers Inc. While there is nothing that indicates that the window is closing, there nonetheless seems to be a rush to offer.
Golar Partners Prices While Parent fills Warehouse?
Was it a vote for shipping, for the MLP structure, or Mr. Fredriksen? At the end of the day, it does not matter as the first shipping IPO of 2011 met with strong demand and priced above its range. Last week, Golar LNG Partners LP (“GMLP”) priced its initial public offering of 12 million shares at $22.50, above the stated range of $20 to $22 per share. Total gross proceed were $270 million, which could increase to $310.5 million if the green shoe is exercised in full. The limited partners own a 30.1% interest in the company with Golar LNG Limited owning the 2% GP interest as well as a 67.9% limited partner interest. The final details of the transaction are shown in the Guts of the Deal below.
Market Timing – Sale of Primary and Secondary Shares by TAL and Insiders
The container leasing business is back on track, growing again at over a 10% CAGR after 2009, which witnessed the first decline in demand in 25 years. After a difficult 2008 to 2009, mirroring the financial crisis, when orders for new boxes were non-existent and manufacturers closed down, the container lessors are back on a spending spree. New containers are needed to meet growing demand, for fleet replacement and to meet the shortfall arising from a reduced spend by the container lines.
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