Unlike other Ross deals, Navigator is not a “distress” play, but rather, a well timed partial “exit” for Ross, very much following the private equity (PE) modus operandi. Prior to the offering, funds tied to Ross own 60.6% of Navigator shares.
Navigator Gas was founded in 1997 by David Butters, a consummate shipping investor originally with Lehman Brothers. In the early 2000’s, as a then over-extended Navigator restructured, the Milonas family acquired a partial interest. In 2012, Wilbur Ross bought out the holdings of Lehman Brothers – at that time the majority holder. As Navigator’s star has risen, it acquired the LPG shipping business from Maersk, with a late 2012 purchase of semi and fully refrigerated 11 vessels for $470m.
Navigator now owns 22 vessels on the water, all between 20,000 - 22,500 cu m, with one secondhand vessel, from the Maersk deal, on the way and seven newbuilds from the Jiangnan yard in China. Some $55m of the proceeds is earmarked for the newbuilds, with more than $300m still due to the yard. If options are declared to build two additional vessels, then $35m of proceeds will be used to partially fund these newbuilds.
A big part of the LPG story is the opening of new trades. Traditionally, LPG from the US Gulf Coast has gone to Latin America. Now, according to a recent podcast from Platts, “…through July, the US has exported record quantities of LPG to Japan…” Platts’ analysis describes a near doubling of export capacity from Enterprise and Targa, both with facilities in the Houston area. With approximately half the fleet coming off charters in the remainder of 2013 and throughout 2014, Navigator hopes to be a big participant in this growth.
The industry section of the Navigator Gas prospectus, written by Drewry, details the growth in the LPG trades, 7.3% compounded annual growth from 2009 - 2012. Ethelyne, with a slower rate of growth historically, is of particular importance to Navigator Gas, with the company noting that: “…we expect increased ethylene production in the U.S. Gulf Coast in response to relatively inexpensive ethane prices driven by U.S. shale gas to result in increased demand for ethylene export to other regions.”
Navigator dominates in an important part of the LPG market; this is not an accident. In speeches at Marine Money, Ross had talked about the value of consolidating a business- which is possible in niche sectors such as gas carriers, though less so in the product tankers and suezmaxes where Ross also plays. The prospectus shows that Navigator Gas controls 496,000 c um of capacity, out of 1.8m cu m of capacity in the all-important 15,000 – 25,000 cu m sector.
Larger ships will also be getting into the US LPG trades. Earlier this month, Enterprise announced a further expansion- with plans for a terminal in either Louisiana or Texas that would serve Very Large Gas Carriers (VLGCs), coming in line in late 2015.
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