Ardmore Shipping IPO shows the way for private equity.

Many Private Equity (PE) investors have been busy plotting the optimal structure and timing for their entrance into shipping. However, one highly successful transportation- savvy investor is already plotting the beginning of the exit from an investment launched during a time that you could not give away product and chemical tankers. Ardmore Shipping, which was formed by private investor Greenbriar Equity Corp in 2010.

Ardmore, which hopes to list on the New York Stock Exchange, presently operates eight vessels, with four on order from SPP Shipbuilding, in Korea, and hopes to acquire as many as 12 additional ships - mainly newbuildings.

This is a good solid story- a financial shipping company formed at cyclical lows now testing the IPO waters; unlike a number of listed companies, it does not operate in parallel with a private entity. Technical managers include Bernhard Schulte and Thome. Its vessels, modern MR product tankers, and chemical tankers, are on charter to names including Koch, Cargill, Itochu and Navig8. Vessels not yet delivered will be of Eco designs, while existing ships have been or will be retrofitted for more economical operation.

Financing for two newbuilds is lined up, from the DVB facility, but, beyond that, Ardmore is at a critical funding juncture. Given the confluence of optimism surrounding refined products shipping and the attention on economical vessel designs, the timing was auspicious for public money raising. Its prospectus reveals that its eco design MR tankers earned in excess of $17,000/day TCE during Q1 of 2013.

The size of the deal, based on the draft prospectus filed, with amount of the “equity raised” inferred by the size of a registration fee, could be as much as $160m. A critical part of its expansion plans will be the successful negotiation of a $235m credit facility with its “relationship banks”. Presently, Ardmore has loans outstanding, in full compliance with covenants, with ABN Amro (at Libor plus 3.25%; $80m is drawn down) and DVB (at Libor plus 3.75%, with $37m already drawn and $45m set to fund two upcoming SPP deliveries in early 2014). Ardmore, which operates out of Ireland, has sourced $31.5m of lease finance from Icon Capital. In reserve is an undrawn revolving credit booked with Bank of Montreal.

If shipping is about people, then it does not get any better than Ardmore’s pedigree. The ceo, veteran shipping man and one-time Navy officer Tony Gurnee, was a banker at Citi, was the CEO at Teekay when it went public,through Goldman Sachs, in the mid 1990’s, and then spent time at Nedship (now part of DVB) and on the “ship” side running MTMM, a company still active in the chemical trades.

Greenbriar is captained by Reg Jones, III-the one time head of Transportation finance at Goldman Sachs (who first worked at Bain & Co. after graduating from Harvard Business School). Its funds have invested in dozens of transportation related companies, in both land and air transportation, though not in the maritime “space”.

By Barry Parker
from New York.



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