Grindrod Shipping, a global provider of maritime transportation services in the drybulk and product tanker sectors, announced a number of transactions relating to the acquisition of an additional 33.25% stake in its IVS Bulk joint venture and the sale of the 2010-built small product tanker Kowie.
A subsidiary of the Company, Grindrod Shipping Pte. Ltd., or GSPL, has agreed to acquire the 33.25% ordinary and preferred equity shares held by one of its two JV partners in IVS Bulk for a total consideration of $44.1 million, thereby increasing its stake to 66.75%. The ordinary equity portion will be acquired for $35.0 million while the preferred equity component will be $9.1 million representing that partner’s 33.25% share of the $27.3 million preferred share capital in IVS Bulk. The acquisition will be funded through a combination of cash on hand, proceeds received from a refinancing of the IVS Bulk capital structure, and a new loan at GSPL, as summarized below. The agreements are subject to customary closing conditions with an estimated closing date of February 14, 2020. We can provide no assurance that we will complete the acquisition until such time that the agreements have been executed and implemented.
In conjunction with the acquisition, GSPL will enter into a revised shareholders agreement with the remaining 33.25% partner in IVS Bulk that will extend the partnership for a further committed period of 12 months and will result in GSPL controlling key aspects of corporate governance of the JV. As a result, the financials of IVS Bulk will be consolidated into the financial statements of Grindrod Shipping Holdings Ltd. going forward rather than being accounted for under the equity accounting method, as has previously been the case.
In order to optimize its capital structure, IVS Bulk has agreed comprehensive refinancing agreements with its lenders. The two existing credit facilities of IVS Bulk will be refinanced with two new senior secured loans totaling $127.3 million, representing an approximate 55% loan-to-value at drawdown with maturity scheduled for 2025. The Company is included as a borrower under one of these facilities. A portion of the proceeds of the new senior secured loans will be used by IVS Bulk to repay the existing shareholder loans in the JV in full and redeem a portion of the preferred share capital of IVS Bulk pro rata. These transactions will occur prior to the acquisition by GSPL of the 33.25% stake from one of its two JV partners.
In addition, GSPL has agreed to a new financing in the amount of $35.8 million with an affiliate of the remaining partner in IVS Bulk. This financing matures in June 2021 and is secured by GSPL’s equity stake in the JV.
Further details regarding the transaction will be shared in our year-end earnings release and presentation scheduled for later this month.
Separately, a subsidiary of the Company has contracted to sell to an unaffiliated third party the 2010-built small product tanker Kowie for a gross price of US$9.2 million. The vessel is expected to deliver to its new owners during February 2020. We can provide no assurance that we will complete the sale of the vessel until such time that delivery has occurred.
Martyn Wade, the Company’s Chief Executive Officer, commented:
“The acquisition of one of our partners’ 33.25% stake in IVS Bulk, and corresponding consolidation of the JV’s financial results, represents a critical step in the growth and development of Grindrod Shipping. We will have reduced the number of vessels accounted for under unconsolidated joint ventures from 19 to one over approximately the last two years, a core focus of ours which has the benefit of simplifying the Company’s financials and operations. IVS Bulk’s 12 vessels are all modern, Japanese built “Eco” vessels that ideally complement our cargo operations. The acquisition is to be financed entirely from cash on hand and new debt, with no equity dilution to our shareholders.”