Aker Philadelphia, backers create 'pure play' Jones Act shipping company

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The following is the text of a news release from Aker Philadelphia Shipyard:

(OSLO) — Aker Philadelphia Shipyard ASA (OSE: AKPS) is pleased to announce the planned establishment of Philly Tankers AS, a Norwegian limited liability company, and its wholly-owned subsidiary, Philly Tankers LLC, a Delaware limited liability company (together “Philly Tankers”).

Philly Tankers has successfully secured equity commitments necessary to finance the purchase of two product tankers from AKPS with deliveries in 2016 and 2017 (the “transaction”), and will have a post-money market capitalization of US $127.5 million. Together with best-in-class partners, Philly Tankers will operate and charter the vessels in the Jones Act market.

“We are delighted to see so much interest in Philly Tankers. The company offers pure-play exposure to an increasingly strong market and is targeting growth through a combination of newbuilds, acquisitions of existing vessels, and potentially through market consolidation,” says Kristian Rokke, chairman of AKPS. “There are two key trends currently shaping the Jones Act market — the tight oil revolution, which has increased demand for product tankers, and a surge in containership orders, which has constrained shipyard capacity. Philly Tankers is well positioned to benefit from the effects of these trends by offering customers modern tonnage in a supply constrained market, as well as reliable operations and substantially improved fuel efficiency versus the existing fleet.”

As part of the transaction, AKPS will invest US $58.5 million for 54 percent of the shares, which AKPS expects to fund through existing cash and proceeds from operations. The remaining sponsors will invest US $59 million for 46 percent of the shares at a subscription price of US $1,000 per share.

AKPS and Philly Tankers, through their U.S. subsidiaries, will enter into binding shipbuilding contracts for the first two product tankers, designated as AKPS Hulls 025-026. The total contract value is approximately US $250 million, excluding construction period financing, initial owner expenses, G&A, and transaction costs. The anticipated profitability of the shipbuilding project for AKPS is in-line with previous guidance for AKPS Hulls 021-030. An option agreement will also be signed for two identical product tankers with deliveries in 2017, designated as AKPS Hulls 027-028, on substantially the same terms and conditions as AKPS Hulls 025-026.

The vessels will be 50,000 dwt product tankers based on a proven Hyundai Mipo Dockyards (HMD) design that incorporates numerous fuel efficiency features, flexible cargo capability, and the latest regulatory requirements. The vessels will be constructed with consideration for the use of LNG for propulsion in the future. The vessels will be identical to the vessels currently under construction at AKPS that will be included in the AKPS-Crowley joint venture.

Philly Tankers expects to hire a best-in-class technical operator prior to delivery of the first vessel to arrange for maintenance and crewing of the vessels, and to ensure that the vessels satisfy all regulatory requirements, among other things. Philly Tankers has a number of attractive options for commercial management and will consider all its alternatives when seeking and arranging employment for the vessels.

Prior to delivery of the first vessel, Philly Tankers will have an ownership and corporate structure that is fully compliant with all applicable Jones Act requirements. Philly Tankers will explore value-enhancing initiatives such as the establishment of a master limited partnership. Philly Tankers will have a board of directors comprised of independent and investor-designated members. Philly Tankers will initially list its shares on the Norwegian OTC, with a target of a U.S. listing by mid-2016.

Closing of the transaction remains subject to satisfaction of customary conditions precedent, including the execution and delivery of satisfactory definitive documentation, and the approval by the general meeting of American Shipping Company of its participation in the transaction. It is expected the transaction will be closed in mid-July 2014.

Arctic Securities and Pareto Securities have acted as joint lead managers for the transaction. Advokatfirmaet BA-HR DA and Blank Rome LLP have acted as legal adviser to AKPS in connection with the private placement. Wiersholm has acted as the legal adviser to the joint lead managers.

Aker Philadelphia Shipyard is a leading U.S. commercial shipyard constructing vessels for operation in the Jones Act market. It possesses a state-of-the-art shipbuilding facility and has earned a reputation as the preferred provider of oceangoing merchant vessels with a track record of delivering quality ships. Aker Philadelphia Shipyard is listed on the Oslo Stock Exchange and 

is majority-owned by Converto Capital Fund, which in turn is majority-owned by Aker ASA. Aker is a Norwegian industrial investment company that creates value through active ownership. Aker's investment portfolio is concentrated on key Norwegian industries that are international in scope: oil and gas, fisheries and biotechnology, and marine assets. Aker's industrial holdings comprise ownership interests in Aker Solutions, Kvaerner, Det norske oljeselskap, Aker BioMarine, Ocean Yield and Havfisk.

By Professional Mariner Staff