Baltic Trading’s IPO Raises $228 Million at Low End (Update2)
March 10, 2010, 7:04 PM EST(Updates with closing prices throughout.)
By Michael Tsang and Craig Trudell
March 10 (Bloomberg) -- Baltic Trading Ltd., the New York- based shipping company formed to operate dry-bulk cargo vessels, raised $228 million in its initial public offering after selling shares at the low end of its price range.
Baltic Trading, established in October by Genco Shipping & Trading Ltd. of New York, sold 16.3 million shares for $14 each yesterday, according to a filing with the Securities and Exchange Commission and Bloomberg data. The company, which asked for as much as $16, will use the proceeds to buy six ships that will transport iron ore, coal, grain and steel products.
The IPO is the first of three U.S. offerings this week and comes after seven companies postponed or delayed initial sales this year. While buyers have extracted concessions in almost every deal, Baltic Trading became the second company in 2010 to price shares within its forecast range as the Standard & Poor’s 500 Index rebounded from a three-month low.
“With markets being much stronger across the board, that’s good momentum building for the IPO market,” said Josef Schuster, the Chicago-based founder of IPOX Capital Management LLC and manager of the Direxion Long/Short Global IPO Fund, which started this month. “If these companies don’t price reasonably well in the market, that would absolutely be disappointing.”
This week’s deals are the first since Hayward, California- based Anthera Pharmaceuticals Inc. raised $42 million on March 1 after reducing its sale by 39 percent.
IPO Forecast
While Barclays Plc predicted in December that U.S. IPOs may triple to $50 billion in 2010, the 11 companies that completed sales prior to this week cut the size of their deals 28 percent on average and raised $1.95 billion, Bloomberg data show.
Symetra Financial Corp., the Bellevue, Washington-based insurer backed by Warren Buffett’s Berkshire Hathaway Inc. of Omaha, Nebraska, was the other company to price its IPO within the range set by underwriters this year.
Bank of America Corp. in Charlotte, North Carolina, JPMorgan Chase & Co. and Goldman Sachs Group Inc. of New York and London-based Barclays led Symetra’s sale.
Morgan Stanley and Dahlman Rose & Co. of New York managed the sale for Baltic Trading, which started trading today on the New York Stock Exchange under the ticker BALT. The shares fell 0.3 percent to $13.96.
Baltic Trading expects to take delivery of five vessels in April and one in October. The ships will compete for cargoes in the spot market rather than seeking longer-term deals at fixed- charter rates, according to its filing. Genco will manage the vessels and contribute $75 million to the company.
Relative Value
The midpoint price of $15 would have valued Baltic Trading at 1.12 times its tangible book value, a measure of shareholder equity that excludes assets that can’t be sold in liquidation, the filing showed. That’s a 29 percent premium to the median for 201 marine-transport companies globally, according to data compiled by Bloomberg.
Prices that Baltic Trading can command to ship cargoes will depend on economic growth in countries outside the U.S., especially China and India, which have driven demand for dry bulk shipping in recent years, the company’s filing showed.
While the Baltic Dry Index, a measure of commodity shipping costs, has climbed 26 percent since Feb. 15, rates have fallen 73 percent from their all-time highs in 2008. Current rates are also about 28 percent lower than the average price over the past five years, data compiled by Bloomberg show.
Shipping rates for dry-bulk routes have also fluctuated more than commodity prices in the past 10 years.
Baltic Dry
The Baltic Dry Index has risen or fallen by at least 45 percent in eight of the past 10 years, with an average change of 96 percentage points, Bloomberg data show. Since 2000, the Reuters/Jefferies CRB Index of 19 commodities has fluctuated an average of 17 points.
Baltic Trading’s IPO comes less than a week after Overseas Shipholding Group Inc. of New York, the largest U.S.-based oil tanker owner, sold 3.5 million shares at $45.50 apiece in an additional stock offering on March 5.
The IPO is also the first of two initial sales by shipping companies this week. Crude Carriers Corp. plans to raise $284 million in a U.S. initial public offering on March 11, according to an SEC filing and Bloomberg data. The Piraeus, Greece-based company was formed in October to engage in crude-oil shipping.
Crude Carriers intends to use the proceeds from the IPO to buy three oil tankers. The company will trade on the NYSE under the ticker CRU. UBS AG of Zurich, Bank of America and Wells Fargo & Co. in San Francisco were hired for the sale.
--With assistance from Moming Zhou in New York. Editors: Daniel Hauck, Chris Nagi.
To contact the reporter on this story: Michael Tsang in New York at mtsang1@bloomberg.net; Craig Trudell in New York at ctrudell1@bloomberg.net.
To contact the editor responsible for this story: Daniel Hauck at dhauck1@bloomberg.net; Nick Baker at nbaker7@bloomberg.net.
