TMAR - Comments
Good point, sand. TMAR definitely has more breathing room than HMAR, especially given the long term due dates on the majority of their outstanding debt. HMAR is currently in default on their existing covenants, and their accountants just gave them a going concern opinion. TMAR has neither of these strikes against them.
Nevertheless, TMAR is being pinched a little, too. Note that the revolver just got pared back to $85 MM, and they've already drawn about $50 MM against it. Last year's capex budget was over $100 MM, due mostly to new vessel construction and upgrades. This year's capex budget has been pared back substantially to about $25 MM. Management believes they can meet their capital needs with operational cash flow or additional draws on existing facilities.
The part that cracks me up, however, is that they're thinking opportunistically about future acquisitions!?! Hey, that's a great way to pull themselves out of the Altman grave... increase Total Assets (TA). Hello!?!
Definitely something to watch in the short-to-medium term.
Razor
PS - Notes from the latest K...
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Liquidity and Capital Resources
The Company's business strategy for the past several years has been to enhance its position as a leading supplier of marine support services by pursuing opportunities to acquire vessel fleets and by diversifying into international markets. Primarily as a result of acquisitions, the Company's total assets have grown from $52.1 million at December 31, 1995, to $768.9 million at December 31, 1998. During 1996 and 1997, the Company completed the acquisition of Saevik Supply, a publicly traded Norwegian company, for a total acquisition cost of approximately $293.7 million, including transaction costs, and acquired 37 supply boats in the Gulf for $177.0 million.
The Company has also constructed, or is in the process of constructing, six new vessels, to increase its international market presence and increase its deepwater capabilities. Additionally, in 1998, the Company completed its vessel upgrade and refurbishment program involving a significant portion of its Gulf supply boat fleet. While this program resulted in significant vessel downtime in 1998, the Company believes it has extended the service lives of many of its vessels and has significantly reduced required maintenance spending in the future.
Capital expenditures for 1998 consisted principally of $101.4 million for the construction of new vessels and other vessel improvements, and $24.2 million of U.S. Coast Guard drydocking and vessel refurbishment costs. During 1998, $158.2 million in funds were provided by borrowings under the Company's bank credit facilities, $84.9 million in funds from operating activities and $6.9 million from the sale of assets. During the period, the Company repaid $123.3 million of debt.
The Company has outstanding $280.0 million in aggregate principal amount of the Notes. The Notes are unsecured and are required to be guaranteed by all of the Company's Significant Subsidiaries (as such term is defined in the indenture governing the Notes, the "Subsidiary Guarantors"). Except in certain circumstances, the Notes may not be prepaid until August 1, 2001, at which time they may be redeemed, at the option of the Company, in whole or in part, at a redemption price equal to 104.25% plus accrued and unpaid interest, with the redemption price declining ratably on August 1 of each of the succeeding three years. The indenture governing the Notes contains certain covenants that, among other things, limit the ability of the Company to incur additional indebtedness, pay dividends or make other distributions, create certain liens, sell assets, or enter into certain mergers or acquisitions.
The Company maintains a bank credit facility that provides up to a $100.0 million revolving line of credit that can be used for acquisitions and general corporate purposes (the "Bank Credit Facility"). The Bank Credit Facility is collateralized by a mortgage on certain of the Company's vessels. Amounts borrowed under the Bank Credit Facility mature on December 1, 2002 and bear interest at a Eurocurrency rate plus a margin that depends on the Company's leverage ratio. The weighted average interest rate for the Bank Credit Facility was 6.8% as of March 1, 1999. The Bank Credit Facility was amended in December 1998 to reduce permitted borrowings to $85 million and increasing to $100 million after June 30, 1999 depending on the Company's leverage ratio. The Bank Credit Facility requires the Company to maintain certain financial ratios and limits the ability of the Company to incur additional indebtedness, make capital expenditures, pay dividends or make certain other distributions, create certain liens, sell assets or enter into certain mergers or acquisitions. Although the Bank Credit Facility does impose some limitations on the ability of the Company's subsidiaries to make distributions to the Company, it expressly permits distributions to the Company by the Subsidiary Guarantors for scheduled principal and interest payments on the Notes.
In June 1998, the Company refinanced Saevik Supply's existing bank credit facilities with a revolving credit facility in the amount of NOK 650 million, or $81.8 million (the "Saevik Bank Facility"). As of March 1, 1999, the Company had approximately NOK 395 million ($49.7 million) of debt outstanding under the Saevik Bank Facility. The Saevik Bank Facility is collateralized by a security interest in certain of the Company's North Sea vessels, requires Saevik Supply to maintain certain financial ratios and limits the ability of Saevik Supply to create liens, or merge or consolidate with other entities. Amounts borrowed under the Saevik Bank Facility bear interest at NIBOR (Norwegian Interbank Offered Rate) plus a margin. The weighted average interest rate for the Saevik Bank Facility was 7.66% as of March 1, 1999. The commitment amount for the Saevik Bank Facility reduces by NOK 50 million ($6.3 million) every six months beginning December 1998, with the balance of the commitment to expire in June 2003.
In connection with the construction of the Company's SWATH vessel, in April 1998 the Company issued $10.0 million aggregate principal amount of 8 year, 6.08% Ship Financing Bonds (the "Ship Bonds") guaranteed by the United States Government. The Ship Bonds are due in 16 semi-annual installments of principal and interest, with the first principal payment due March 1, 1999, and are secured by a first preferred ship mortgage on the SWATH vessel and by an assignment of the vessel's charter. The proceeds of the Ship Bonds were used to repay a portion of the amounts outstanding under the Company's Bank Credit Facility.
Due to industry conditions, the Company intends to limit 1999 capital expenditures to those required to complete existing vessel construction projects and regulatory-mandated drydocking costs. In order to further reduce its maintenance capital expenditures, the Company expects to deactivate, or "stack," an average of between 10 and 12 of its Gulf supply boats during 1999 that were not refurbished as part of its vessel upgrade and refurbishment program.
Capital expenditures planned for 1999 consist primarily of the remaining costs to complete two new vessels currently under construction. Expenditures for the two new vessels in 1999 are expected to total approximately $24.4 million. The Company is completing construction in Norway of the Northern Admiral, a 275-foot, technologically advanced AHTS with 23,800 horsepower that is scheduled to be delivered in June 1999. The Company is also completing construction in the Gulf of the Hondo River, the second of two deepwater 230-foot supply vessels. The first vessel, the Spirit River, was delivered in December 1998, while the Hondo River will be completed in the second quarter of 1999. The Company has a pending application and expects to receive a commitment from the U.S. Maritime Administration's Title XI ship financing program to provide long-term financing for approximately $18.8 million of the cost of the Spirit River and the Hondo River.
The Company believes that cash generated from operations together with available borrowings under its bank credit facilities will be sufficient to fund the Company's currently planned capital projects and working capital requirements. The Company's business strategy has historically been to grow through acquisitions to expand its operating capabilities and international operations. As a result of depressed worldwide oil prices and reduced drilling and development activity in most international areas, the Company believes that in 1999 it may identify additional acquisition opportunities. Depending upon the size of any acquisition, it is likely that the Company would require additional equity financing and may incur additional debt financing in order to complete the acquisition. The Company believes that any such financing would involve the issuance of either common stock, convertible preferred stock or other securities entitling the holders to acquire common stock. |
