Norwegian OTC – Finding Paths to Liquidity for Stranded Investors Marine Money conference June 2015 Christian Moxon Managing Director, Head of US offices Christian.moxon@paretosec.com
What is the OTC market? A proven entry to the private equity/private placement market Unregulated market with access to trading/secondhand market Structure and pricing based on previous transactions and precedence An unlimited ability to pre-sound market All companies/industries can utilize market, but it is not for everyone Speed to market enables accuracy in pricing Pareto knows this market better than anyone 2
USD 4.5bn raised in shipping equity in this cycle on the N-OTC list N-OTC Transaction 2012 – To date 29 4,547 8 1,830 21 2,717 2012 USDm raised # of transactions Pareto Securities transactions Other 3
Where are the companies now? N-OTC Transaction 2012 – To date 1) listed listed Still N-OTC registered – considering options 2012 4 1) Assuming completion of contemplated Gener8 IPO
How did they perform while being N-OTC registered listed Return from initial N-OTC placement until pricing at IPO 1) 62 % 52 % 22 % 1) Assuming completion of contemplated Gener8 IPO at mid-point pricing 5 Source: Factset, Pareto Securities Research
How did they perform while being N-OTC registered listed Return from initial N-OTC placement until pricing at IPO 62 % 28 % 5 % 6 Source: Factset, Pareto Securities Research
How have the ones that remain N-OTC registered performed compared to its listed peers? Share price performance product tankers Share price performance dry bulk 0 % 50 % 45 % -10 % 40 % -20 % 35 % -30 % 30 % -42 % -40 % 25 % -50 % 20 % 22.5 % -60 % 15 % -69 % -69 % -70 % -75 % 10 % -80 % -84 % -80 % 5 % 6.5 % 1.5 % 1.5 % 1.3 % -90 % 0 % SALT-US SBLK-US GOGL-US PIONEER SB-US DSX-US EIGHT-NO STNG-US DIS-IT ASC-US NNA-US Share price performance since April 2014 to date 1) Share price performance since September 2013 to date 2) 1) Pioneer share price based on return from initial N-OTC raise to last done transaction price 2) EIGHT share price based on return from the first N-OTC raise to the 3 rd N-OTC raise 7 Source: Factset, Pareto Securities Research
Private equity still constitute a small part of the total capital structure Gross amount of PE shipping investments World’s shipping fleet (incl. newbuild orders) USDbn USDbn 70 3 140 8 300 760 21 3 4 250 2 1 2009 2010 2011 2012 2013 2014 Total Dry Wet Container General cargo Total 97 % 3 % Government, bank debt, bonds, public equity and unfuned orderbook "Newly invested" private equity 8 Source: Marine Money, Tufton Oceanic, Watson Farley & Williams
Paths to liquidity 9
Alternatives to the holy grail Oslo IPO Case examples: Tankers Investments January 2014 March 2014 Further vessel acquisitions and growth of company Liquidity post listing - N-OTC - Oslo-listed 2 often more placement of months after important to investors than the USD 250m initial N-OTC listing venue itself raise - Acquisition of 8x Norwegian 2 nd hand afra- (shipping) and suezmaxes companies priced on par with US companies Quick and document light process 10 Source: Pareto Securities
Alternatives to the holy grail M&A Case examples: Navig8 Crude Tankers 62% unleveraged USD/share return 16.2 13.5 Larger (listed) 10.0 players are looking for growth – smaller platforms looking for liquidity Consolidation will continue to be the theme of the Dec-13 March-14 Jun-15 shipping market IPO in June-15 1) USD 160m N-OTC USD 250m N-OTC placement in Dec-13 placement in March- @ USD 10.0/share 14 @ USD 13.5/share 1) USD 16.2 per BLUE share is based on a Genmar/BLUE exchange rate of 0.89x and assumes completion of the contemplated Gener8 IPO at mid-point pricing 11 Source: Pareto Securities Source: Pareto Securities
Alternatives to the holy grail Recapitalization Illustrative re-leverage example USDm 50 Equity 60 value 40% Recapitalization 40 Bond debt 30 equity through the bond market provides investors with a 60% 60 60 Bank debt (partial) exit leverage The bond product with flexibility on use Vessel value today Vessel appreciation Vessel value tomorrow of proceeds, covenants and tenor Exit through re-leveraging of asset values making it a viable option for all asset classes and age profiles 12 Source: Pareto Securities
Alternatives to the holy grail Asset sale Case examples: Navig8 Product Tankers USDm 25% unleveraged return 60 48 Staggered asset sales an effective alternative to reduce transaction risk compared to an en- bloc sale of the entire fleet Sept-13 May-15 Entered into Sold 3x newbuilding newbuilding contract at contracts at USD 60m USD 48m per vessel per vessel in May 2015 following completion of N-OTC raise in September 2013 13 Source: Pareto Securities
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