the maritime merchant banking firm
TRANSCRIPT
The Maritime Merchant Banking Firm
www.amausa.com
Index
Our View of the Market
A Brief Overview of AMA
Current Assignments and Representative Completed Transactions
Appendix- Detailed AMA Structure- Staff Biographies
Our View of the Market
We recognize shipping to be an extremely volatile business, where timing can be everything
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Freight Rates – 1 yr Capesize
TC
Source: Clarksons Shipping Review, Booz·Allen, AMA
1990 Built vessel
Costs (Operating, Capital, and Profit)
Revenues
Cost Curves based
on year of build
1995 Built vessel
1986 Built vessel
Comparison of Historic Shipowner Costs and Freight Rates for a Capesize VesselShipping Cycles
VALUECREATION
Market Comes Back in Balance
Freight Rates Adequate to Support Capital Investments
Shipowners Aquire Secondhand or Newbuilding Tonnage
Economic Pain - Older Ships Scrapped or Layed-up
Surplus Capacity Introduced into the Market
Oversupply of Capacity Leads to Decline in Freight Rates
Shipbuilding Shocks
Economic & Regulatory Shocks
VALUEDESTRUCTION
Shipping markets enjoyed a broad revival in 2000 but weakened in 2001…
…along with a weak global economy, persistent industry problems remain
Note: Rates are for modern tonnage
Source: Clarkson Research Studies
Tanker One Year Time Charter Rates Dry Bulk One Year Time Charter Rates
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Capesize Panamax Handymax
While the picture is improving, low barriers to entry means fragmentation remains the rule
Due to low barriers to entry, shipowning is an exceptionally fragmented business
– The percent of owners owning 20 or more tankers went recently went from 5 to 10 percent – but owners with just 1 to 2 ships comprise nearly half the market
– Similar fragmentation can be found across shipping markets
The net effect is a unstable market, where marginal players can have significant impact
The situation, however, is improving– Mergers and pools/alliances are consolidating
assets– The supply of easy finance is shrinking,
helping restrain marginal owners
Capacity Share of Top Vessel Operators
Note: Includes long term chartered vessels Source: Drewry, Intertanko, Containerisation International and Lloyd’s Register data
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Container Crude Tanker
Other
COSCOAPLMSC
EvergreenP&O Nedlloyd
Maersk
Other
TeekayBergesenChevronMitsui OSKSaudi AramcoFrontline
Companies are consequently subscale with few very large or “corporate” players
With only a handful of vessels, most shipowners have not been able to take advantage of the benefits of scale
– Lower operating costs– Lower capital costs– More commercial flexibility– Less in a position of price taker– More ways to create or extract value
While shipping is extremely capital intensive, few companies have matured to the point of having continuous access to equity markets
Few business have evolved beyond being able to provide a small portion of a customers needs – serving as one-off service providers rather than entrenched partners
Overcapacity is a continuing threat in this highly cyclical business
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Products Aframax VLCC
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Handysize Handymax
Panamax Capesize
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Tanker Orderbook Relative to Fleet Size Dry Bulk Orderbook Relative to Fleet Size
Note: Assumes average vessel life of 25 years, 2-3 percent demand growth
Source: Clarkson Research Studies
Long term sustainable orderbook
The tanker orderbook was restrained in the mid 90s –
helping set up the 2000/1 boom
The tanker orderbook was restrained in the mid 90s –
helping set up the 2000/1 boom
The world’s yards can still produce more ships than are needed – and are often given incentives to do so
The real threat is independent ordering from a number of owners all reading the same markets signs – which can quickly overwhelm supply
…All leading to inadequate long term returns
Crude ShippingAverage Returns On Capital Employed
(1982-1998)
Source: Warburg Dillon Read
Industry WACC = 7%
Cycle ROCE (Aframax) =6%
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Cycle ROCE (VLCC) =6%
PetrochemicalsAverage Returns On Capital Employed
(1982-1998)
Source:Chem Systems
While recent returns have been spectacular – long term returns in shipping investors have been very poor, in many cases destroying equity
Many industries have similar volatility to shipping – but earning peaks come far more regularly to make up for the troughs
Cycle ROCE (USA) =16%
Industry WACC = 9%
Cycle ROCE (EUR) =12%
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Additionally, sources of funding are becoming tighter
Banks – the traditional source of capital – are facing increasing difficulties and becoming more focused in their lending
– Burgeoning problem loans (notably telecoms)– Tougher lending and pricing requirements, particularly in
Europe (embracing the American relationship banking model)
– Targeting larger relationships
Bond market now virtually closed to shipping
Equity markets difficult to tap
In all, shipping companies face the most difficult capital markets since the mid 80s
Solutions lie, however, in evolving traditional business models while respecting the cycles…
There are immense benefits to scale in specific segments – and the companies pursuing this strategy, such as Teekay and Frontline, are benefiting
Shippers are also opening up to increased cooperation – but only a few shipowners, such as OSG with its relationship with PDVSA, are positioned to meet their needs
Security of return can be sought in either defensible niches – or raising barriers to entry
…and AMA can help companies chart this course
To take advantage of these changes, a more sophisticated approach to capital raising is needed
Companies need to know the supply and cost of capital in all markets – and be nimble in tapping new sources of funding as they open up
Shipping companies benefit from partners like AMA, which are always thinking about how to create equity value
A Brief Overview of AMA
AMA is a unique merchant bank
Established in 1987, AMA is the only merchant banking firm in the U.S. exclusively focused on the maritime industry
AMA is staffed by twelve banking professionals, who on a combined basis, have over 140 years of experience in the maritime industry
Affiliated with NIB Capital of the Netherlands, an AA- rated bank, with a significant ship financing business
Offices in New York and Oslo
We provide a wide range of services…
Provide strategic and M&A advisory services
Underwrite and distribute public debt and equity securities in the US
Advise, help access and arrange for capital – including all forms of debt and equity
Uncover investment opportunities for our shipping and non-shipping investor clientele
American Marine Advisors, Inc.
American Marine Advisors, Inc.
American Marine Securities, Inc.
American Marine Securities, Inc.
American Marine Credit, LLC.
American Marine Credit, LLC.
AMA Shipping Fund I, LLC.
AMA Shipping Fund I, LLC.
…across the whole of the globe
AMA Offices
Country experience of AMA professionals
AMA’s Global Experience
Our clients are industry leaders – and we bring them distinct strategic advantage
AMA delivers…
An unparalleled global information network
Pro-active counsel based on long term relationships
A unique ability to bridge the worlds of shipping and Wall Street
Access to multiple capital markets including Norway and the US
The value we deliver is well recognized
Current Assignments and Representative Completed
Transactions
AMA is helping transform the maritime industry
Building NewBusinesses
RestructuringTroubled
Companies
Accessing Corporate and Low Cost Debt
Advising a major tanker operator on a potential merger with a public tanker company
Advising a premier shipping company on its potential acquisition of a publicly traded, government owned shipping company
Advising a major European gas carrier on suitable M&A opportunities
Advising a major dry bulk player on merger opportunities
Raising several hundred million dollars in unsecured debt for a top tier company
Advising a major tanker operator on an off-balance sheet synthetic lease structure
Arranging tax advantaged financing for a fleet of Panamax bulk carriers
Exploring recapitalizing a major shipping company – including using our own equity
Exploring merging two troubled liner companies for the benefit of both
Advising the Bondholders of Enterprises Shipholding Corporation
Helping Cruiseinvest find opportunities for the R cruise ships
We have a long record of successful engagements
Advised the Creditors of Golden Ocean in the sale of the company to Frontline
Represented Pegasus Shipping (Hellas) Ltd. on restructuring its high yield bond issue
Represented the Bondholders in the restructuring of bonds issued in the high yield market by TBS Shipping
Advised the Estate of American Classic Voyages in the bankruptcy sale of the company to Delaware North Corporation
Represented the Bondholders in the restructuring of the high yield bonds issued by Global Ocean Carriers
Arranged off-balance sheet lease of $175 million for Overseas Shipholding Group (OSG) backed by charter commitment to BP-Amoco
Advised Overseas Shipholding Group (OSG) on a $350 million capital raising
Advised Deutsche Verkehrsbank on its acquisition of Nedship Bank
We have a long record of successful engagements (continued)
Structured and arranged an $85 million working capital financing for Samsung Heavy Industries
Arranged a $110 million debt financing for Essar Shipping
Assessed and valued the shipping portfolio of a major European financial institution for the company’s board.
Arranged the financing for three container vessels with long-term time-charter to Hyundai Merchant Marine.
Arranged mezzanine financing used in a UK tax-lease for two newbuilding container vessels for P&O Nedlloyd (total project value $97 million).
Structured, arranged and funded the sale/lease-back of two multi purpose vessels for Griffin Shipping of South Africa (transaction value $14.6 million) and then sale of the vessels to a Norwegian K/S.
Managed the divestment of the shipping division of the India conglomerate, Larsen & Toubro Ltd.
…and our efforts draw high praise
Appendix
- Detailed AMA Structure
- Staff Biographies
American Marine Securities, Inc.
American Marine Advisors, Inc.
American Marine Advisors, Inc.
American Marine Securities, Inc.
American Marine Securities, Inc.
American Marine Credit, LLC.
American Marine Credit, LLC.
AMA Shipping Fund I, LLC.
AMA Shipping Fund I, LLC.
AMA’s wholly-owned broker dealer established in May 1998
Member NASD SIPC
Underwrites and distributes public debt and equity securities in the US
Long-term goal to become the leading underwriter of public and private equity in the U.S. for the global maritime industry
Positioned to provide shipping expertise, something that has been notably absent in a number of transactions the last four years, to the U.S. capital markets
American Marine Credit, LLC.
American Marine Advisors, Inc.
American Marine Advisors, Inc.
American Marine Securities, Inc.
American Marine Securities, Inc.
American Marine Credit, LLC.
American Marine Credit, LLC.
AMA Shipping Fund I, LLC.
AMA Shipping Fund I, LLC.
Established to provide credit products to our clients
Provides and underwrites all types of secured debt from senior to mezzanine
Provides bridge financing to facilitate bonds offerings, equity issues or lease facilities
Arranges and distributes syndicated loans
Prices, underwrites and funds credit more quickly than banks
Since its inception in May 1998, AMC has committed to providing in excess of $800 million in debt facilities
American Shipping Fund I, LLC.
American Marine Advisors, Inc.
American Marine Advisors, Inc.
American Marine Securities, Inc.
American Marine Securities, Inc.
American Marine Credit, LLC.
American Marine Credit, LLC.
AMA Shipping Fund I, LLC.
AMA Shipping Fund I, LLC.
Established in January 2000 to acquire Dry Bulk Carriers, Containerships, Chemical Carriers, Product Tankers and Gas Ships.
Purchasing power: $200m.
Target ROE: 20% per annum.
The Fund’s investment period closed on 12/31/01.
Fund partners are NIB Capital and GATX, a major U.S. finance company
AMA Shipping Fund I – Deal One:
Three 3,000 TEU second hand container vessels owned by HMM
Equity from Thor Dahl
$13.7 million second mortgage loan provided by the AMA’s Fund
Vessels time-chartered back to HMM
The first mortgage financing provided by NIB Capital
Sale and Time Charter Back Transaction with HMM
AMA Shipping Fund I – Deal Two:
The investment was sold in May 2002 yielding a net IRR to limited partners of 23.8 percent
Vessels were on bareboat charters to Pan Ocean of South Korea
The related loans were purchased at a discount to outstanding amounts
Senior Loan for the acquisition was provided by G.E. Capital
Vessels included:
– Three 27,000 DWT bulkers
– One 73,000 DWT bulker
– One 700 TEU feeder vessel
Purchase of Five Vessels and the Related Loans From Seoul Bank
Appendix
- Detailed AMA Structure
- Staff Biographies
Staff Biographies…
Morten Arntzen - Chief Executive OfficerMorten Arntzen has been involved in the global shipping industry continuously since 1979. He set up and ran the Global Shipping Group of Manufacturers’ Hanover Trust Company in 1984, during which period he was involved, among other things, in a number of high-profile debt restructurings. Prior to joining AMA in 1997, he ran the Global Transportation Group for Chase Manhattan Bank, the same position he held at the new Chemical Bank prior to its merger with Chase in 1995. He currently serves as a director of IM Skaugen of Norway, Essar Shipping of India, TBS Shipping in the USA and Chiquita Brands International.
Rolf A. Wikborg – President of AMA Norway ASMr. Wikborg was a founder of AMA in 1987, and now heads AMA’s expansion into Norway. Prior to AMA, Mr. Wikborg was the Managing Director of Fearnleys, Mexico. In 1983, he joined Fearnleys in the Project Department involved in sale & purchase, newbuildings and coordination with Fearnley Finans. He is an officer in the Royal Norwegian Navy and holds a BSc (Hons) in Management Sciences from UMIST, England and M.I.C. from Oslo in International Maritime and Marine Insurance Law.
Staff Biographies…James G. Dolphin - Senior Vice PresidentJim Dolphin has spent well over a decade in the maritime industry. Before joining AMA, Jim led the global maritime management consulting practice at Booz Allen & Hamilton. He has extensive experience in strategy and financial execution, and has served a wide range of clients including large independent owners, liner companies, oil majors and other global resource companies, ports and maritime service companies. Jim previously worked as a commercial banker specializing in shipping and holds a BA from Rice University.
Paul M. Leand, Jr. – Senior Vice PresidentPaul Leand previously worked at the First National Bank of Maryland. Over a nine year period, he managed the Bank’s Railroad Division and, later, International Maritime Division. Paul has extensive experience in structuring leasing and debt facilities. Since joining AMA in 1998, he has been heavily involved in AMA’s high-yield and bank restructuring assignments as well as the large
debt placement assignments. He holds a BS/BA from Boston University’s School of Management.
Peter Shaerf – Senior Vice PresidentFormerly Managing Director of Poseidon Capital Corp, Mr. Shaerf has over 27 years in the industry and has advised hedge funds and investors on a variety of maritime investments in both equity and distressed debt. He has been involved in raising equity and structuring transactions in the dry bulk, tanker and container sectors. Mr. Shaerf is a Director of General Maritime Corp, MC Shipping, TBS International, and Trailerbridge. Prior to co-founding Poseidon, he ran The Commonwealth Group, a leading broker and consultant in the container and liner sector. Peter is a Director of The Containerization and Intermodal Institute and a member of the Maritime Law Association.
Staff Biographies…Harrys Kosmatos - Vice President Harrys Kosmatos begun his career in 1994 with Elka Shipping (London) Ltd., training in the chartering, operations and finance departments. In 1995 he joined the Shipping Banking Group of the Commercial Bank of Greece. There he worked as a credit analyst in the Bank’s London office. He joined AMA in May of 1997 and has focused on raising AMA’s profile and involvement in the Greek shipping market. Harrys has a BA (Hons) in Classical Studies and Politics from the University of London (Queen Mary & Westfield College) and an MSc in Shipping, Trade and Finance from City University Business School, London.
Kevin O’Hara – Vice PresidentKevin O’Hara previously worked in the ship finance departments of Nedship Bank and the First National Bank of Maryland. During his time at Nedship and First National, he worked with shipping and offshore clients in North and South America, as well as working with distressed shipping companies in the special credits area of First National. He holds a BBA with a double major in Finance and International Business from Loyola College in Maryland.
John C. Wobensmith – Vice PresidentPrior to joining AMA, John C. Wobensmith worked at The First National Bank of Maryland. During his seven-year tenure at the Bank, he worked in the International Maritime Division. He then worked in the Bank’s Special Assets group restructuring and managing distressed maritime loans. While at AMA, he has been involved in the structuring and raising of both debt and equity, M&A transactions and working with companies through the restructuring/bankruptcy process. He also is currently responsible for AMA Shipping Fund I. He holds a BA in Economics (Hons) from St. Mary’s College.
Staff Biographies…
M.Y. Choi - Assistant Vice PresidentPrior to joining AMA 1998, M. Y. Choi worked for at Fearnleys Korea Ltd. where she was in charge of ship financing and special projects. At AMA she has been principally responsible for maintaining, expanding and developing the Company’s client base and relationships in the Korean shipping and banking industry. M.Y. Choi has done multiple transactions with all the major Korean shipping and shipbuilding concerns. She holds a BA degree in Business Administration from Ewha Woman’s University in Korea.
Yuan (Jack) Sun - AssociateJack Sun joined AMA in the summer of 1999. Prior to that he worked for seven years in international trade for China National Machinery I/E Corp., one of China's largest trading companies. Later, he worked as Project Manager in the International Marketing department of Sericol International Ltd., a division of Burmah Castrol Plc., in the U.K. Jack holds a B.Eng. from Xi’an Jiaotong University, China and an MBA in Finance and International Strategy from the Yale School of Management.
Robert Longnecker –AssociatePrior to joining AMA in 2002, Robert worked in the private equity group of Credit Suisse First Boston. Before that he spent three years at Lehman Brothers in the transportation group working on corporate finance and mergers and acquisitions. Robert holds a BA in economics from Cornell University.
American Marine Advisors, Inc.200 Park Avenue, 31st Floor
New York, N.Y. 10166Phone: (212) 682-3344
Fax: (212) 682-3464Video Conf.: (212) 661 8012/5969
Contacts: Home/Mobile: Ext.: E-mail:
Morten Arntzen (203) 966 3120 308 [email protected] Choi (646) 552 0499 312 [email protected] Dolphin (646) 552 1192 306 [email protected] Kosmatos (212) 535 3301 307 [email protected] Leand (917) 442 2300 314 [email protected] Longnecker (917) 213 9320 304 [email protected]
Kevin O’Hara (646) 552 0160 305 [email protected] Shaerf (646) 623 5333 313 [email protected] Sun (718) 263 3189 303 [email protected] Wikborg +47 9061 2813 [email protected] C. Wobensmith (646) 552 4025 310 [email protected]