In this update, we cover two companies raising big bucks from their shareholders as well as the latest on the former premier of the British Virgin Islands as he awaits trial for drug-smuggling and money-laundering charges in Florida.
One of the more sensational stories we covered last month (here) was the news that the premier of money laundering centre tropical paradise the British Virgin Islands (BVI), Andrew Fahie, and the managing director of the territory's ports authority, Oleanvine Maynard, had been detained in Miami. They were arrested by American law enforcement agents in a drugs bust, and Mr Fahie was even caught on tape offering to allow Mexican cocaine-smugglers use the BVI's ports to trans-ship and store narcotics bound for Puerto Rico in return for millions of dollars. Ms Maynard's son, Kadeem Maynard, was arrested at the same time in St Thomas in the United States Virgin Islands.
What has happened to the hapless Mr Fahie, you might wonder? His case goes to trial on July 18 in Florida, and he has lodged a US$1 million bail bond to secure his freedom ahead of the case coming to court. He has also signed a pledge waiving any requirements for the American government to make an extradition request, were he to flee to another country, which, naturally, he said he would never do, the Jamaica Observer reported here.
The bail bond was lodged in two parts, and Mr Fahie had to demonstrate that the cash was not from nefarious sources. Instead, the half a million bond provided by Mr Fahie's childhood friend, Bobby Hodge, was sworn under oath to come from the profits of Mr Hodge's BVI businesses, which include six ferries, a Hertz rental car franchise, a marina, and a hotel called Carrie's Comfort Inn. Carrie's Comfort Inn does sound just like somewhere British prime minister Boris Johnson might stay, but I digress.
Full details in the bvinews.com coverage here.
The second part of the bail bond was a US$500,000 personal surety that was co-signed by Mr Fahie himself, his daughter, and another friend. The former BVI leader had to surrender his travel documents to the court and must wear an electronic monitor at all times as he is not allowed to leave his daughter's home in Florida. If found guilty, he and the Maynards will face up to twenty years in prison for each count.
When you recall that federal prosecutors claim Mr Fahie had stated he was also open to supplying illegal guns to the Mexican cartels, to paying off the BVI's police chiefs and elected officials in the territory to turn a blind eye to the transit of cocaine, and of ensuing some minor drug busts occurred to distract from the alleged smuggling for the cartel, you have to wonder about the BVI's status as a flag of convenience and offshore financial centre.
Mr Fahie has not been alone in requesting cash and financial support from his friends and family.
Italian oilfield services and drilling giant Saipem has also had to call on its friends to help it out of a mess. In Saipem's case, this aid is coming from its largest customer and shareholder, Italian state oil company ENI, and the Italian government's investment arm.
Then, in April, Saipem's semi-submersible crane vessel Saipem 7000 suffered a catastrophic failure of its number one crane during its five-year load test in Norway. The main block wire "parted" (broke), and the two cargo barges it was lifting were dropped spectacularly into the sea (video here). Whilst no one was injured, thankfully, the images of Saipem 7000 (here) listing in the aftermath of the accident seemed to symbolise the company's problems.
But now both Saipem as a company and Saipem 7000 have stabilised. On June 13, the company announced (here) a return to service for its crane barge, with crane number two being certified by class, allowing it to operate with a lifting capacity in line with the scope of work for the Seagreen Wind Farm off Scotland. Saipem 7000's work on Seagreen is the installation of 114 foundation jackets; 23 of them have been already installed, the company says, while the remaining 91 will be installed from now until year-end 2022. The damaged crane number one is scheduled to complete its repairs to return to its full lifting capacity by early 2023.
Financially, Saipem is also now on the road to repairing its financial situation. Last week, the board approved a €2 billion (US$2.11 billion) rights issue (here). Holders of Saipem ordinary and savings shares will be granted one right for each share held, giving them the right to subscribe 95 New Shares at a discount of approximately 30 per cent compared to the company's ordinary shares.
Since ENI and the Italian government have agreed to subscribe to the rights issue, it is effectively a done deal. Saipem will get the emergency funds to see it through 2022 and implement its Strategic Plan. The company recently announced the bareboat charter of a nearly new jackup drilling rig, Perro Negro 11, from a Chinese yard for a term contract in Saudi Arabia, so it is clearly more confident for the future (here).
Regular readers will recall that we are not big fans of Malaysian operator Yinson Holdings, which has a market capitalisation of US$1.46 billion, a pipeline of massive floating production storage and offloading (FPSO) vessel projects in Brazil, and a risk profile that scares us just a little (here).
Earlier this month, Yinson held a rights issue to raise some MYR1.19 billion (US$272 million) from its shareholders. The rights shares are scheduled to be listed in the Kuala Lumpur stock exchange tomorrow, on June 28. The company says that 64 per cent of the gross proceeds raised will be utilised for the FPSO Maria Quitéria project for Petrobras.
We would warn that if the Maria Quitéria project is delayed or experiences problems, Yinson will likely have to make further calls on its shareholders. The size of these Brazilian projects is massive and even a well-capitalised company like Yinson faces peril if it executes badly or runs into operational problems.
Yinson's three big Brazilian FPSO projects come at a time when inflation is rampant and costs are rising across the whole offshore industry (most of the world in fact). The last time the industry ran into inflation, supply bottlenecks and cost hikes were in the boom of 2005 to 2008, and then several FPSO companies were caught out using outdated costs and schedules. See here for BW Offshore's 2009 profit warning of a US$179 million impairment charge. This time it won't be different.
Yinson's plans for the balance of the US$272 million raised were a little strange. Yinson said it planned to utilise 26.7 per cent of the proceeds for repayment of bank borrowings, even though it will be facing calls for working capital until its three Brazilian floaters are completed and on-hire. It committed 4.6 per cent of the new funds for working capital, and a bizarre 3.7 per cent (US$10 million) "for the expansion of renewable energy businesses." This looked to me to be opportunistic "greenwashing" to make the rights issue appear ecologically friendly for sensitive investors.
For a company of the size of Yinson today, US$10 million is peanuts, but the rights issue was 20 per cent oversubscribed, so the investors clearly approved.
One group of investors who have cause for depression are those holding shares in James Fisher and Sons, once Britain's largest publicly listed marine services and shipping company, now a basket case where the shares trade at prices last seen in early 2005. The share price has collapsed 85 per cent since we asked whether there was "Something fishy at James Fisher" in early 2020 (here).
Last week, James Fisher chose to fire its CEO, Eoghan O'Lionaird, announcing it in a weaselly press release (here) entitled "Appointment of Chief Executive Officer."
It's rather like announcing your divorce by saying you have found a lovely new partner.
The company has chosen an oilfield services specialist to attempt to turn around its fortunes, choosing Schlumberger veteran Jean Vernet to try to sort out the mess that O'Lionaird inherited and struggled with for three years.
Vernet's experience includes five years as Chief Financial Officer of Expro, the well services company, during which Fisher says, "he played a key role in its successful turnaround." What's strange is that Vernet has no specific shipping experience, nor renewables experience, nor defence experience, and these are Fisher's three largest business lines. It's also strange that the Expro stock price shows no visible turnaround during Vernet's tenure, just a grinding fall from US$183 in 2013 to US$38 in 2017 when he left, to around US$11 today. If he's a successful turnaround specialist, I'm a Pulitzer prize-winning journalist.
But good luck to Vernet taking on the over 150 legal entities that make up the beleaguered Fisher group.
"Patriotism is the last refuge of the scoundrel," wrote eighteenth century philosopher Samuel Johnson. So, it is no surprise to find Fisher now wrapping itself in the red, white, and blue of the United Kingdom's Union Flag – literally.
On June 21, Fisher unveiled the pioneering "Diamond SOV", an Ulstein Design SX221 twin X-stern Service Operation Vessel (SOV) concept for the wind farm industry. The paint scheme in the pictures of the concept SOVs Kingsnorth Fisher and Aberthaw Fisher accompanying the press release are truly bizarre, as if Spice Girl Geri Halliwell has been allowed to design a ship in the heady days of Girl Power and Britpop in the 1990s. What were they thinking?
The ships are certainly innovative, technically, having effectively two sterns and four main propeller units. The designers say that this improves the operational window and makes the vessels ideal for wind farm operations. Partnering with UK-compatriot Graig Shipping, Fisher says that it, "is currently in discussion with major shipyard groups to reach specifications in conjunction with valued customers, with the first vessel capable of being completed by the end of 2024."
We look forward to the update on the actual newbuilding order. However, we have warned that the wind farm support business is not a panacea for bad management or poor strategy. It is crowded, it is low margin, and there is a stampede to invest at present (here).
Background reading
More on Samuel Johnson and his patriotism quote here.
For Geri Halliwell's Union Jack dress which clearly inspired James Fisher and Ulstein, see here.
