SEACOR Holdings Announces Convertible Debt Issuance

seacor holdings

By MarEx 2015-11-30 15:51:22

SEACOR Holdings Inc. (NYSE: CKH) (“SEACOR Holdings”) today announced that its offshore marine subsidiary, SEACOR Marine Holdings Inc. (“SMH”), entered into an agreement to issue $175 million in convertible notes to investment funds managed and controlled by The Carlyle Group (“Carlyle”). It is expected that the notes will be issued on December 1, 2015. The notes have a seven-year duration, a coupon of 3.75% and will be convertible into shares of SMH common stock at an initial conversion rate of 23.26 shares per $1,000 principal amount of notes (approximately 18.7% of the current outstanding shares of SMH on a fully-diluted basis, equivalent to a conversion price of $43.00 per share). The transaction contemplates the eventual separation of SMH from SEACOR Holdings’ other business lines, potentially via a spin-off of SMH or via a spin-off of SEACOR Holdings’ other business lines. A final decision to effect or implement the separation has not been made and, if the contemplated spin-off of SMH does not occur within two years, the holders of the notes will have a one-time right to require SMH to repurchase the notes at par plus any accrued and unpaid interest and an on-going right to exchange the notes for shares of SEACOR Holdings common stock at an initial exchange rate of 12.82 shares per $1,000 principal amount of notes (equivalent to an exchange price of $78.00 per share).

Elaborating on the transaction, Charles Fabrikant, Executive Chairman and CEO of SEACOR Holdings, commented: “This transaction provides additional capital for our offshore group to seek out opportunities arising from the dislocation in the energy sector to acquire discrete assets and pursue strategic transactions that complement our existing business. By adding the Carlyle capital, after paying off intercompany debt and transaction costs, SMH will be able to take advantage of opportunities while preserving a strong balance sheet. The terms of the notes provide SEACOR Holdings the flexibility to retain or separate its offshore marine business in order to maintain its disciplined and strategic approach to capital allocation. We are extremely pleased to be associated with Carlyle, one of the premier global alternative asset managers, and view its investment as the beginning of a relationship that will bring value to both parties.”

Rodney Cohen, Managing Director and Co-Head of Carlyle’s U.S. Equity Opportunity Fund, said: “With this investment, we are excited to partner with SEACOR Holdings and SMH, a top-tier operator in the offshore marine business. We look forward to working with Charles Fabrikant, John Gellert, and the entire SEACOR team - who have consistently demonstrated their ability to invest and create value throughout cycles - as they continue to develop opportunities in this industry.”

SMH will be run as a standalone entity with a discrete balance sheet. As of September 30, 2015, the offshore group on a standalone financial reporting basis had $1,095.1 million of assets and $389.2 million of liabilities. Assets included $197.0 million of cash and construction reserve funds, $647.5 million of equipment and $128.7 million of investments in 50% or less owned companies. Liabilities included $175.6 million of deferred income taxes, $45.4 million of deferred gains relating to sales of equipment in prior periods, $54.1 million of third party debt and $31.0 million of inter-company debt. SEACOR Holdings will continue to provide SMH administrative services and support business development initiatives both prior to the contemplated spin-off and during a transition period after the spin-off.

Goldman Sachs acted as exclusive financial advisor to SEACOR Holdings in connection with the proposed transaction and financing, and Milbank, Tweed, Hadley & McCloy LLP acted as their legal counsel. Carlyle was advised by PricewaterhouseCoopers as financial advisor and Kirkland & Ellis LLP as legal counsel. Equity for Carlyle’s investment is being provided by Carlyle U.S. Equity Opportunity Fund II, L.P.

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