Norway: Navig8 Products Tanker Successfully Raises USD 170 Mil.

Chairman Nicolas Busch says a second share placement is now on the cards after Oslo OTC listing beats target with $170m haul thanks to surprisingly strong appetite among investors

Pools power Navig8 has become the latest shipowner to find joy on Oslo’s over-the-counter (OTC) market, exceeding expectations with an upsized $170m haul for an initial fleet of six “eco” products tankers this week.

Navig8 co-founder and chairman Nicolas Busch confirms to TradeWinds that the deal closed on Tuesday amid strong investor interest, with Navig8 Product Tankers now setting sights on a second private placement in the coming months and then a full listing either in Oslo or New York.

“Bear in mind this was a very quick deal in the middle of August,” Busch said. “The amount of traction we got in the last few weeks caught us all by surprise. It went really well. There’s a lot of interest in the [products] space. The sponsorship was very strong between Navig8 and DVB [Bank]. The pricing was very attractive and the yards very good. If the deal is good, it sells itself.”

The fund-raiser supports a start-up fleet of six energy-efficient long-range-two (LR2) newbuildings set for 2015 delivery from South Korea’s Sungdong Shipbuilding (four) and China’s Guangzhou shipyards (two). They were ordered at $47.9m each, which the deal prospectus says is about $5m below market price.

DVB’s private-equity arm has agreed to backstop 13.9% of the deal, and the bank is in talks to provide debt financing in the range of 55% to 60%.

A second placement in the coming months will seek to raise funds for eight LR2 options, Busch says.

One finance source tells Trade­Winds that Navig8’s offering had attracted four or five big investors and “a group of smaller investors”.

Busch elaborates, calling the interest “pretty broad”.

“It came from many corners,” he said. “Interest from US institutionals is very strong right now, but so is interest from European and Norwegian and Far East investors. The deal was significantly oversubscribed. We were able to give allocations to people who were expecting to come in, but most had to [make] do with a little less than was expected.”

Both Busch and Jason Klopfer, managing director of Navig8’s Connecticut office, say it would be wrong to assume that the presence of DVB in the deal traced to a distressed scenario under which the bank moved on clients unable to fulfil newbuilding obligations.

“It wasn’t distress-related,” Klopfer said. “We found the ships and contracted the ships. DVB’s involvement stems from a long-standing joint venture we’ve had with them.”

Navig8 is only the latest to tap the red-hot Oslo OTC market. The owner is following in the footsteps of Dorian LPG, Scorpio Bulkers and Greenship Bulk Trust, which have all raised funds worth a collective $479m this summer.

The extra $30m raised by Navig8 in the enlarged subscription – expanded to 17 million shares at $10 each – “gives the company flexibility” in the months ahead, says Busch.

“It’s pretty straightforward,” Busch said of Navig8’s pitch to investors. “It’s a combination of the eco savings on the LR2s, which we calculate at $5,000 to $6,000 per day, and the fact that the demand outlook is very compelling going into 2015. The LR2 trade is supported by refinery upgrades in Asia and the Middle East, and also the benefit of the Panama Canal expansion in 2014 for US exports to Asia.

“As the market starts to understand fuel savings, we think the spread in valuation between eco and conventional vessels will widen. We think these vessels will return between $1.8m and $2m per year each in cash flow compared to conventional vessels, and that will go straight to the bottom line.”

TradeWinds was first to report Navig8’s plans to finance a products-tanker owning arm through a private placement in July. The ships are to trade in Navig8’s Alpha 8 LR2 pool.

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Navig8, September 2, 2013