This type of preferred stock is structured so that it mimics the characteristics of high yield debt issuance, while not being counted as additional debt, and thus blowing through covenants which may effectively limit further debt issuance.
Box Ships, the container sector offshoot of bulk specialist Paragon, said that it will be working through a line-up of underwriters that adds new names to the list of usual suspects.
Box Ships said that it would use the offerings to proceeds to: “…redeem all of its outstanding Series B-1 Preferred Shares, to repay a portion of its outstanding debt and for general corporate purposes.” The Series B-1 shares are held through Neige- a company controlled by company founder Michael Bodouroglou, who funded Box Ships with an infusion of $38.5m in June 2012, part of which was repaid a month later when Box Ships raised $28.5m, net, in a secondary offering.
In effect, the new preferred shares, offered to the public, will enable the remaining portion of Bodouroglou’s “loan” to be repaid. Within the outstanding debt ledger, a remaining balance of $13m had been due to Paragon in May 2013. As of March 2013, Paragon still owned 21.1% of Box Ships’ common shares, with Bodoroglou still owning 12.1% of the common shares.
The line-up of underwriters for the Box Ships issue includes Global Hunter- one of two lead managers, an underwriter with an active following of shipping investors. The selling group also includes the other lead- National Securities Corp, a boutique working with emerging growth companies. Aegis Capital Management, another small broker dealer courting wealthy investors, is acting as co manager. The underwriting team also includes Maxim Group, which has played a role in many shipping deals, and Ladenburg Thalman (an old line firm working with smaller companies) acting as Joint Bookrunning Managers.
This grouping underscores that the importance of the skills in these smaller boutique shops in handling high yield debt or equity, investment trusts, and distribution paying partnerships. In the next shipping cycle, securities offerings will borrow such features from energy and real estate.
Tskaos Energy Navigation, which had raised $50m in a high profile offering of a similar security (yielding 8%), in early May, announced that it will be paying its first dividend on the shares (listed on the NYSE) at end July. In that deal, Incapital and DNB Markets acted as joint book-running managers, and Incapital acted as the sole structuring agent. Clarkson Capital Markets and Brock Capital, not well known, but with a history of shipping deals under its belt, acted as co-managers.
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