Posted on April 11, 2017
By Greg Miller, Fairplay
US-listed shipowners raised USD2.63 billion via the sale of equity and debt securities in the first quarter of 2017, according to data compiled by Fairplay. If that pace continues, this year’s proceeds for US-listed companies would top the all-time record set in 2014, when NYSE- and NASDAQ-listed owners raised USD8.17 billion.
The year-on-year change has been dramatic. The proceeds in the first three months of 2017 exceeded those raised by US-listed shipping companies in the first 10 months of 2016. It was the second highest quarterly total on record, according to Fairplay’s data, exceeded only by the second quarter of 2014, when US-listed shipping companies raised USD3.24 billion. The third-highest grossing period on record was the first quarter of 2014, when US-listed shipping companies raised USD2.55 billion.
Although share pricing was far higher during the 2003–08 super-boom years and there were more initial public offerings in that period, there were fewer listed companies, fewer follow-on offerings, and thus lower overall proceeds in that earlier era.
Beyond the sheer volume of recent shipping securities sales, the first-quarter data revealed three key trends. First, the offerings were extremely sector-specific. They heavily favoured only two investment strategies: an institutional investor-centric play on liquefied natural gas (LNG) shipowners that use a long-term charter business model, and a hedge fund and retail investor-centric play, or bet, on the spot dry bulk sector.
According to Fairplay data, US-listed owners with primarily bulker fleets raised USD1.122 billion in the first quarter, representing 42.7% of the total, while LNG shipowners raised USD1.118 billion, or 42.6% of the total. These two sectors accounted for the vast majority (85.3%) of all first-quarter proceeds.
The second key trend is that debt securities have made a dramatic comeback, with USD1.506 billion raised via Norwegian bonds, US unsecured bonds, private convertible debt, Term Loan B securities, and promissory notes. Debt securities accounted for 57% of first-quarter proceeds. In stark contrast, debt securities represented just 19% and 20% of proceeds in full-year 2015 and 2016 respectively. This year’s debt resurgence is more akin to the equity/debt pattern in record-setting 2014, when US-listed shipping companies generated 37% of their offering proceeds from debt securities.
The third trend is a continuation of a pattern that emerged in 2016: a much heavier emphasis on private placements, insider sales, and other qualified investor approaches as opposed to traditional ‘plain vanilla’ public offerings. Private sales of equity and debt securities accounted for USD1.167 billion or 44.5% of gross proceeds in the first quarter. Similarly, non-public offerings accounted for 44% of proceeds in full-year 2016. In all previous years covered by Fairplay data, such sales accounted for less than 10% of proceeds.
Breaking the first-quarter data down by individual company, the largest generator of proceeds was Navios Partners at USD505 million, comprising a USD405 million Term Loan B issuance and a USD100 million registered direct offering of equity.
In second place was Golar LNG Ltd, with a USD402.5 million private convertible senior notes offering. In third place was DryShips, raising USD400 million with two ‘equity line’ offerings via secretive Kalani Investments. In fourth was Golar LNG Partners, with USD353.5 million through a USD250 million Norwegian bond sale and a USD103.5 million public stock offering. In fifth was GasLog LNG Ltd, with a USD250 million senior notes sale. Offerings from these five companies accounted for almost three-quarters of all first-quarter proceeds.
Smaller sums were raised by TEN (USD103.2 million), Eagle Bulk (USD100 million), Navigator Gas (USD100 million), GasLog Partners (USD76.9 million), Golden Ocean (USD60 million), KNOT Offshore (USD56.1 million), Star Bulk (USD51.5 million), Nordic American Offshore (USD50 million), Teekay LNG (USD35 million), Top Ships (USD27.8 million), and Globus (USD5 million).