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A tale of three offerings: The nine-figure equity sales of Dorian, Zim and Torm

Dorian raising up to $102.3m, Ofer selling $111m-$211m-worth of Zim, Oaktree sells $250m of Torm

Strong share pricing has given Dorian LPG an opportunity to raise cash by selling common equity. It simultaneously gave private equity firm Oaktree a chance to exit a portion of its Torm stake, and allowed Israeli billionaire Idan Ofer to monetise more of his Zim position

AS MUCH of the shipping world partied at Posidonia in Greece, teams of bankers and lawyers toiled away on opportunistic sales of US-listed shipping equity. Offerings that could ultimately raise more than a half-a-billion dollars in total proceeds were either announced or closed in the past week.

There were three major offerings in three different sectors, each with different drivers:

Very large gas carrier owner Dorian LPG sold 2m of its NYSE-listed shares for $44.50 per share, with an option to sell an additional 300,000 shares. Gross proceeds totalled $89m, or $102.3m if the option is exercised. The offering was announced after the closing bell on Wednesday and priced before the opening bell on Thursday.

The Dorian offering is something that has rarely been seen on Wall Street in recent years: a well-valued, larger-cap shipowner with a strong balance sheet selling shares to fund corporate needs from a position of strength.

Also on Thursday, Kenon Holdings, controlled by Israeli shipowner and billionaire Idan Ofer, announced the block sale of 5m shares of NYSE-listed container line operator Zim for net proceeds of $111m. Kenon also entered a “collar” (hedging) transaction that could result in the sale of 5m additional Zim shares for further proceeds of $100m.

The Zim share sale is a rare instance of a long-time shipowner and sponsor selling a portion of the company through a secondary offering — as opposed to a financial investor doing so, as in the case of Oaktree’s secondary offering of Torm shares.

On Monday, June 3, Denmark- and Nasdaq-listed product tanker owner Torm announced the closing of Oaktree’s sale of 6.9m Torm shares for gross proceeds of $250m.

What Dorian LPG, Zim and Torm all had in common: Their shares were in the middle of major upswings, allowing sellers to take advantage of recent gains.

Dorian LPG has been the best-performing US-listed shipping stock in any sector. Prior to the announcement of its follow-on offering, Dorian’s adjusted share price was up 142% year on year.

Torm announced the secondary offering by Oaktree on May 30. Over the previous year, its adjusted share price had jumped 80%.

Zim’s shares have skyrocketed by 265% since late November, when Red Sea diversions began and upon news of the Ofer sale.

Dorian offering a rarity vs other recent sales

US-listed shipowners constantly used follow-on offerings to raise capital in the 2000s and the first half of the 2010s, in some cases to fund newbuilding programmes, in other cases — particularly after the global financial crisis — to comply with debt covenants.

Larger-cap US-listed shipping companies then retreated from common equity offerings over the past decade.

Share sales have been dominated in the first half of the 2020s by microcap Greek owners doing serial dilutive offerings of shares and warrants for small proceeds amounts (under $20m), through deals led by investment Maxim, and more recently, Aegis Capital.

The equity sales over the past week featured much larger investment banks, much larger shipowners, and much larger proceeds amounts.

Jefferies acted as lead bookrunning manager for the Dorian follow-on, with SEB as joint lead bookrunning manager, and Pareto, Fearnley Securities, Arctic Securities, DNB, BNP Paribas, and Credit Agricole also participating.

Citigroup handled Oaktree’s sale of Torm shares, as well as Kenon’s block-trade sale of Zim shares and the collar transaction.

There are few recent precedents in the US public market for the follow-on by Dorian: an underwritten offering by a larger-cap US-listed shipowner, not a microcap; a deal that is priced overnight, not on a time-to-time basis through an at-the-market (ATM) process; and a sale done by an already listed larger shipowner, not an initial public offering.

Only three shipping companies have raised money through the sale of common equity via US IPOs in the past nine years: dry bulk owner Himalaya Shipping (March 2023, $45m), Zim (February 2021, $217.5m), and Gener8 Maritime (June 2015, $210m), which no longer exists.

Several larger shipowners have sold common equity through ATM programmes in the past half-decade — although not this year, and only to a very small degree last year.

Flex LNG sold $14.3m in shares via an ATM from November 2022-December 2023, Tsakos Energy Navigation sold $43.8m in common shares via an ATM in 2022, Nordic American Tankers raised $99m in January 2021-February 2022, and Frontline raised $51.2m in 2021.

Secondary offerings by financial investors vs controlling shipowners

Recent common equity sales involving larger US-listed shipowners have generally been secondary sales by shareholders cashing out of positions, not primary sales for the benefit of the companies.

Private equity secured substantial stakes in shipping in the early 2010s as part of restructurings. Private-equity groups were then stuck holding onto their shipping positions for much longer than they had anticipated and are finally, a decade later, seeing opportunities to exit.

Oaktree obtained its stake in Torm when the product tanker owner restructured in 2015. The recent sale brings Oaktree’s ownership of Torm down to 46.7% from 53.4% previously. Oaktree divested its stakes in Star Bulk and Eagle Bulk last year (Eagle Bulk was subsequently bought by Star Bulk), and reduced its position in product tanker owner Hafnia.

Equity sales by financial players are much more frequent than equity sales by sponsoring shipowners. Financial players intend to sell their shares from the day they acquire them, whereas shipowners generally take a multigenerational view.

But controlling shareholders do, upon occasion, take some chips off the table.

The d’Amico family sold 6.2m shares of Milan-listed product tanker owner D’Amico International for $43.5m on May 15, reducing the family stake from 65.65% to 60.65%.

And Ofer’s latest sale of Zim shares is not his first.

The Israeli government sold 50% of Zim to Israel Corporation in 1969. Ofer became the controlling shareholder of Israel Corporation in 1999. In 2015, he spun off several of Israel Corporation’s companies, including Zim, into Kenon Holdings. Ofer now owns 61.6% of Kenon Holdings.

The largest shareholders of Zim at the time of its 2021 initial public offering were Kenon (32m shares, 27.9%), Deutsche Bank (15.7m shares, 15.7%), and Danaos Corporation (10.2m shares, 8.9%). The Israeli government no longer owned common equity, but rather, a “golden share” with certain stipulations.

Deutsche Bank and Danaos obtained their IPO stakes in Zim as part of earlier restructurings, in the same way Oaktree obtained shares in shipping companies like Torm and Eagle Bulk.

Deutsche Bank sold all of its Zim shares by March 2022. Danaos sold 3m shares of Zim in 2021 for $120.7m, and its remaining 7.2m shares of Zim in 2022 for $246.6m.

Kenon sold 1.2m shares of Zim in 2021, bringing its ownership down to 30.8m shares or 25.8%. By March 2023, Kenon had sold another 6m shares, bringing its stake down to 20.7%.

The latest sale of 5m shares brings Kenon’s ownership down to 16.5%, and if the collar transaction triggers another 5m sale (the collar has a two-year period), Kenon’s ownership of Zim would fall to just 12.3%.

Ironically, the driver of Ofer’s latest windfall is the attacks by the Houthi rebels in the Red Sea.

By forcing longer voyages around the Cape of Good Hope that coincided with peak season demand, the Houthis — who vowed to punish Israeli shipping in retaliation for the war with Hamas and called out Zim by name — have caused Zim’s share price to spike, providing Kenon with a surprise monetisation opportunity that will further enrich Ofer, the third-wealthiest person in Israel.

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