Deep Sea Supply Plc has today entered into an agreement to acquire 10 PSVs.
The total price paid for the 10 vessels including remaining CAPEX is USD 366 million, the total broker value for the vessels is USD 419 million.
Deep Sea Supply will raise approximately USD 200 million through a Private Placement to partly finance the acquisition of the vessels. The Private Placement is fully underwritten by the Company’s largest shareholder, Hemen Holding Ltd.
The Transaction will increase the current fleet of the Company from 30 to 40 vessels and the Company’s market capitalization from approximately USD 200 million to USD 400 million.
The Company will after the transactions have a value adjusted equity ratio of 50%, enabling debt financing with attractive interest cost and with low amortization. The 10 PSVs will achieve attractive cash break even rates, estimated to be USD 10,000 to 12,000 per day. The current TC market for these vessels is around USD 23,000 to 26,000 per day.
The Transaction will position the Company for future dividend payments and the Company aims at paying dividends on a quarterly basis as soon as possible.
The Acquisition of ten PSVs
The 10 PSVs are acquired through the acquisition of 100% of the shares in PSV Holding Inc. . PSV Holding is owned by Greenwich Holdings Ltd, an affiliated company of Hemen Holding.
Through the acquisition of PSV Holding, the Company will assume ownership of five PSVs; “Sea Tantalus”, “Sea Titus”, “Sea Tortuga”, “Sea Falcon” and “Sea Flyer”, all of which were delivered from Cochin shipyard in India and Sinopacific shipyard in China during 2013 and 1Q 2014.
All five vessels are operational. “Sea Falcon” and “Sea Flyer” are on 5-year contracts (plus options) with Apache in the UK sector of the North Sea. “Sea Tantalus” was recently awarded 2 years (plus options) with Nexen in the UK sector of the North Sea.
“Sea Tortuga” has a contract for 13 months (plus options) with ENI North East Africa. “Sea Titus” is currently mobilizing to West Africa. Day rates are in the range of approximately USD 23,000 to USD 26,000.
Furthermore, PSV Holding has five vessels under construction, one 4,100 dwt PSV of STX 05-L CD design at Cochin Shipyard Limited in India and four 4,600 dwt PSV of Ulstein PX 105 design at Sinopacific in China. These newbuilds are expected to be delivered during 3Q and 4Q 2014. The vessels are state of the art PSVs of Norwegian design with good cargo capacities, low fuel consumption, clean design and well equipped. PSV Holding’s sole activity consists of owning these five PSVs and being ultimate buyer under five PSV newbuilding contracts. PSV Holding has no employees.
The total consideration to be paid by the Company for all the shares in PSV Holding is based on an Enterprise Value (equity plus net debt and remaining capital expenditure) of USD 366 million, including capital expenditure commitments of USD 136 million. Fair market value of the vessels and newbuilding contracts is USD 419 million based on the average of broker values from two recognized ship brokers per 31 March 2014 (on an Enterprise Value basis). Deep Sea Supply hence acquires the vessels at approximately 13% discount to market values. Deep Sea Supply intends to secure bank financing in the amount of approximately USD 200 million towards the 10 vessels and newbuilding contracts, which combined with the proceeds from the announced private placement of new shares in the Company will fully fund the Transaction. The Company has received offers of such bank financing of which loan amounts of USD 118 million are committed for the first 6 vessels while indications are received for USD 82 million of financing for the final 4 newbuildings. The received offers for debt financing are from leading shipping banks with attractive margins and around 28 years amortization profile. The Transaction is expected to close during June 2014.