S.D. Standard Drilling has secured 15.6% ownership in New World Supply, a Cayman Island exempted company that, through its wholly owned subsidiaries, owns six platform supply vessels.
The company recently increased its fleet to ten PSVs after buying three large Norwegian-built PSVs from Volstad Shipping.
Standard Drilling said on Wednesday that the six new vessels are all 2013-built 3300 CD PSVs and include World Diamond, World Peridot, World Pearl, World Emerald, World Opal and World Sapphire.
The mid-size PSVs are all built at Damen Shipyard Group in Galati (Romania) with 728m2 deck space, 3,300 DWT, and equipped with DP II capability.
According to the company, the vessels were originally acquired en-bloc by New World Supply from World Wide Supply (WWS), on a “where is / as is basis”, for a total consideration of $27.5 million. The initial capitalization of New World Supply exceeded this amount by $5 million in order to ensure that New World Supply is properly funded for its operation going forward, hence the initial all equity financing of New World Supply is $32.5 million. The purchase price for 15.6% ownership in New World Supply is $5.1 million. The opportunity to capitalize New World Supply was offered pro-rata to all bondholders of WWS.
The company currently owns $19.746 million (face- value) of WWS bonds. These bonds were acquired for $3.410 million. As bondholder in WWS, the company had rights to subscribe for shares in New World Supply and has been allocated 15.6% of the shares in New World Supply. The net investment for the New World Supply shares to be booked in 1Q 2017 is estimated at $3.3 million after subtracting the initial proceeds that the company will receive from its bondholding in WWS.
Furthermore, the company said it may receive up to $750,000 in additional proceeds from its bondholding in WWS, however, the company estimates this figure to be lower due to expenses related to winding down WWS.
To remind, by October last year, WWS had all its six vessels laid up due to lack of work.Come November and the company was facing a major financial risk due to its inability to pay interest to its lenders.
Fleet of 16 PSVs
Following the completion of investments in New World Supply and acquisition of vessels from Volstad Shipping, Standard Drilling now owns 100% of three large-size PSVs and has invested in additional 13 mid-size PSVs, bringing the total fleet of partly and/or fully owned vessels up to 16 PSVs – all purchased at low values.
“We are very pleased with the investment in the vessels. The vessels are favorably priced at approx. $4.6 million per unit, representing a discount of approx. 86% to the actual newbuild price of approx. $34 million and a discount of approx. 76% to the 25- year current newbuild parity of a four-year-old vessel with an implied value of approx. $18.9 million,” says Martin Nes, Chairman of the company.
The investment in New World Supply will be financed through the company’s cash holding, the share contributions from the subsequent offers and the company’s $10 million revolving credit facility recently entered into with Saga Tankers.
Earlier in January, the company announced that it had a cash holding of approx. NOK 330 million (equivalent to approx. $39 million) prior to the acquisition of three Volstad PSVs. The subsequent offer, related to the private placements that have been completed, is expected to increase the company’s cash holding with up to NOK 14.3 million (approx. $1.7 million).
New World Supply is a newly incorporated entity with no historical financial information as of now.