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Ridgebury Crude Tankers / RT Holdings
Company Presentation
April 2015
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2
Agenda
1
COMPANY INFORMATION
2
MARKET UPDATE
3
FINANCIAL SUMMARY
4
SUMMARY
5
APPENDIX
3
Ridgebury at a glance
Company description
•
Efficient, well-capitalized tanker company
–
–
–
•
Crude: 7 Suezmax and 2 Aframax tankers
Product: 6 medium-range (MR) tankers
Manage 4 VLCCs for financial owners
Strategy
•
•
•
•
Vessels trade in leading commercial pools
–
–
•
Owned by Management and Riverstone
$257 million committed equity
Low-cost operator, no conflicts of interest
Acquired 15 vessels at attractive prices
–
–
–
•
Strategy
Heidmar, Teekay and Norient
Spot exposure in a recovering market
Technical management by well reputed
ship managers
–
Strong on-hire and cost performance
Buy high quality ships at historically low prices
– Crude: Deep value play with strong upside
– Product: Secular growth, lower volatility
Efficient spot exposure in recovering market
Grow through accretive secondhand acquisitions
Maximize shareholder returns via sale or IPO
Philosophy
•
•
•
•
Adept buyer of quality modern tonnage
– Highly analytic yet opportunistic
– Not afraid to be contrarian
Low overhead operation, no conflicts of interest
Efficient vessel finance and employment
Management aligned with stakeholders
4
Modern, high quality fleet from top yards
Security vessels
Vessel
Type
Year Built
DWT
Country Built
Shipyard
Employment
Ridgebury Lessley B
Suezmax
2013
158,319
Korea
Samsung
Blue Fin
Ridgebury John Zipser
Suezmax
2009
164,772
Korea
Hyundai Samho
Blue Fin
Ridgebury Nicholas A
Suezmax
2007
159,395
Japan
Universal (JMU)
Blue Fin
Ridgebury Astari
Suezmax
2002
149,991
Japan
Universal (JMU)
Blue Fin
Ridgebury Captain Drogin
Suezmax
2007
166,468
Korea
HHI
Blue Fin
Ridgebury Mary Selena
Suezmax
2006
146,427
Japan
Universal (JMU)
Blue Fin
Ridgebury Lindy B
Suezmax
2007
146,356
Japan
Universal (JMU)
Blue Fin
Ridgebury Sally B
Aframax
2003
105,672
Japan
Sumitomo
Teekay
Ridgebury Alice M
Aframax
2003
105,745
Japan
Sumitomo
Teekay
Ridgebury Alexandra Z
MR
2009
50,251
Korea
SPP
Norient
Ridgebury Cindy A
MR
2009
50,162
Korea
SPP
Norient
Ridgebury Rosemary E
MR
2009
50,261
Korea
SPP
Norient
Ridgebury Katherine Z
MR
2009
50,216
Korea
SPP
Norient
Ridgebury John B
MR
2007
45,975
Japan
Shin Kurushima
Norient
Ridgebury Julia M
MR
2007
45,980
Japan
Shin Kurushima
Norient
5
5
Company Structure
Management team
Riverstone Global Energy and Power Fund V (Cayman), L.P.
RT Holdings, LLC
(Marshall Islands)
Ridgebury Holdings LLC
(Marshall Islands)
100%
100%
100%
Ridgebury Tankers LLC
Ridgebury Crude Tankers LLC
(Marshall Islands)
(Marshall Islands)
Ridgebury Aframax
Tankers LLC
USD 210m
bond
(Marshall Islands)
Ridgebury
Delta LLC
Ridgebury
Foxtrot LLC
Ridgebury
Golf LLC
(MI)
(MI)
(MI)
Ridgebury
Alexandra Z
(MR 2009)
Ridgebury
Cindy A
(MR 2009)
Ridgebury
Rosemary E
(MR 2009)
Ridgebury
Bravo LLC
Ridgebury
Charlie LLC
Ridgebury
Echo LLC
(MI)
(MI)
(MI)
Ridgebury
John B
(MR 2007)
Ridgebury
Julia M
(MR 2007)
Ridgebury
Katherine Z
(MR 2009)
Ridgebury Management LLC
(Delaware)
Operational / Management Entity
Ridgebury
Alpha LLC
Ridgebury
Romeo LLC
Ridgebury
Whiskey LLC
Ridgebury
Yankee LLC
Ridgebury
Sierra LLC
Ridgebury
Zulu LLC
(MI)
(MI)
(MI)
(MI)
(MI)
(MI)
Ridgebury
Lessley B
(Suez 2013)
Ridgebury
Nicholas A
(Suez 2007)
Ridgebury
John Zipser
(Suez 2009)
Ridgebury
Astari
(Suez 2002)
Ridgebury
Sally B
(Afra 2003)
Ridgebury
Alice M
(Afra 2003)
Ridgebury
Tango LLC
Ridgebury
Uniform LLC
Ridgebury
Victor LLC
(MI)
(MI)
(MI)
Ridgebury
Captain Drogin
(Suez 2007)
Ridgebury
Mary Selena
(Suez 2006)
Ridgebury
Lindy B
(Suez 2007)
6
6
Experienced management team
Robert P. Burke – Chief Executive Officer
•
Career in shipping as investor, manager, financier and owner
−
Chembulk Tankers - CEO
−
Great Circle Capital - Partner & Managing Director
−
GE Capital - Managing Director, Marine Finance
−
Ship’s Officer (tankers)
−
Columbia University MBA, US Merchant Marine Academy
Hew Crooks – Chief Financial Officer
•
Career in maritime, energy and infrastructure investment
•
Career in shipping operations and finance
−
Safe Water Network - SVP Operations
−
GE Capital - Risk Manager/Director Marine Origination
−
Great Circle Capital - Partner & Managing Director
−
−
Stanton Capital - Partner & Managing Director
10 years operations / marketing with Hoegh Autoliners
and Hanjin Shipping
−
Investcorp International; Lehman Brothers
−
US Merchant Marine Academy
−
Amherst College
Walter Bromfield – Vice President Finance
•
Steven Fitzgerald – Vice President Operations
Career in ship finance and administration
Andre Zibrov – Vice President Engineering
•
Career in fleet management and engineering
United Maritime Group – Sr VP Finance and CFO
−
Crowley, Teekay, OMI, Heidmar
−
Chembulk Tankers – CFO
−
15+ years onboard experience
−
Maritrans Inc – CFO and Corporate Secretary
−
15+ years onshore supervisory experience
Villanova University MBA, The Wharton School BS
Economics
−
State Maritime Academy (Odessa)
−
−
7
Performance highlights
Strong financial
and operating
performance
 TCE earnings outperformance : $29,400 /d in 4Q2014 ; $41,350/d 1Q2015
 On-hire performance above 99% since closing
 Significant EBITDA increase in each quarter : 4Q2014 $11.2 million ; 1Q2015 Est. above $19.0 million
 Net leverage reduction through cash generation and appreciation in vessel values
Improving credit
 Redeemed $10 million on March 20, 2015
quality
 Asset Coverage Ratio has improved from ~140% at closing to ~170% currently
Market
fundamentals
developing as
expected
 No net fleet growth in 2014; ~2% expected for 2015
 Supply / demand balance has led to strong rate environment
 Up-tick in ordering clouds picture beginning in 2017 and beyond
 Ridgebury has maintained disciplined approach focused on cash generation and returns
Management
and shareholder  Two older Aframax tankers purchased and delivered late 2014 generate high cash-on-cash return
 Despite capital availability, continue to avoid “growth for growth’s sake”
alignments
8
Agenda
1
COMPANY INFORMATION
2
MARKET UPDATE
3
FINANCIAL SUMMARY
4
SUMMARY
5
APPENDIX
9
First Quarter Update
•
Strong market throughout Q1
– Net pool distributions: $39,260 /day
– EBITDA estimate above $19.0 million;
(previous guidance $18-$20 million)
– Fleet 100% on-hire
•
Cash position:
– $20.4 million as of 3/31/2015
– $19.4 million as of 12/31/2014
– $8 million interest and $10 million
principal paid 3/20/2015
10
RCT Performance Outlook
•
Core thesis continues to play out
– Solid supply / demand fundamentals
– No significant newbuilding deliveries before late 2016
– Rates and earnings have significantly outperformed forecast
•
Owners have begun to order vessels
– 18 Suezmaxes on order at bond placement versus 67 today
– Current orderbook ~15% of fleet
•
Second hand market strong with few candidates at reasonable prices
•
In current environment, focus is on cash generation and financial flexibility
11
Asset Market: Developing as Expected
Suezmax values approaching long-term averages
Secondhand vs newbuilding: gap has narrowed
USDm
110
%
20%
100
Bond offering
90
10%
Bond offering
0%
80
70
65
60
64
59
57
-10.8%
-10%
-11.5%
-20%
50
40
-30%
30
20
2001
2003
2005
2007
Suezmax NB
Suezmax 5-y-old
2009
2011
2013
2015
5y-old 10y avg.
5y-old 15y avg.
-40%
2001
2003
2005
2007
2009
2011
2013
2015
5y old discount to newbuildings
10y avg. discount
Source: Clarksons monthly data series
12
Suezmax Charter Rates at Historical Averages
1y Time Charter rates (USD/day)
Spot Earnings (USD/day)
60000
150000
140000
55000
130000
50000
120000
45000
110000
100000
40000
33,000
35000
90000
80000
30000
70000
25000
23,000
60000
51,171
50000
20000
15,000
15000
35,818
40000
23,227
30000
10000
20000
10000
5000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Suezmax 1y TC
Aframax 1y TC
MR 1y TC
Suezmax (avg.)
Aframax (avg.)
MR clean
Source: Clarksons, DNB Markets
13
Market Outlook
•
Increasing ton-mile demand
– Growing demand from Asian economies
– More long haul movements from Atlantic to Asia
– High OPEC production positive for seaborne trade
•
No Suezmax or Aframax net supply growth before late 2016
– Existing orders known; ~2 year lead time for new orders
– Significant increase post-2016
•
Lower oil prices positive for sector
–
–
–
–
Increases arbitrage opportunities
Potential to stimulate demand growth
Reduces fuel costs
Floating storage so far more talk than reality
14
Oil Prices and Production
•
Tanker rate drivers:
–
–
–
–
•
Ton-mile Demand (Cargo carried * Distance moved)
Net Vessel Supply
Congestion, weather, other temporal factors
No significant historical correlation to oil prices
High OPEC production is historically positive for tanker rates
– Correlation was overwhelmed by vessel oversupply from 2008 – 2013
•
Falling oil prices positive in short term (lower bunker fuel cost)
•
Impact of future production cuts:
– Positive if reduction is North American (supply not exported via tankers)
– Negative if reduction is OPEC (supply mainly exported on tankers)
15
Fleet Profile and Expected Suezmax Deliveries
Suezmax Fleet & Orderbook
Orderbook Factors
# of vessels
Suezmax Fleet Profile
50
Existing Fleet
45
40
Order
book
•
Total orderbook ~15% of existing fleet
•
Korean yards hungry but have not cut
prices significantly, yet
•
Chinese yards emerging, aggressive on
price
•
Traditional owners remaining relatively
cautious
•
Speculative newcomers cannot raise
funding
35
30
25
20
15
10
5
0
Current Orderbook
Orderbook at Bond offering
Source: Clarksons, ACM Breamer
16
Pool Performance
Blue Fin Pool (Suezmaxes)
Norient Product Pool (Product Tankers)
USD/day
USD/day
60,000
30,000
50,000
25,000
40,000
20,000
30,000
15,000
20,000
10,000
10,000
5,000
0
0
2008
RT pro forma
2009
2010
2011
RT break-even1
2012
2013
2014
1y TC rate (net)3
2015
Q1
2008
2009
2010
RT pro forma
2011
2012
RT break-even2
2013
2014
2015
Q1
1y TC rate3
Spot market strategy outperforms in rising market
Source: Clarksons, Heidmar, Company
1Suezmax break-even based on avg. opex of ~7,000 USD/day, SG&A of 1,100 USD/day and interest expenses of 6,267 USD/day (7.625% of bond principal)
2MR break-even based on avg. opex of 6,100 USD/day, SG&A of 750 USD/day and interest expenses and debt instalments of 5,590 USD/day 3Net of 1.5% commission
17
Agenda
1
COMPANY INFORMATION
2
MARKET UPDATE
3
FINANCIAL SUMMARY
4
SUMMARY
5
APPENDIX
18
Ridgebury Crude Tankers - Financial Update
• Performance since bond placement:
– 2Q affected by delivery timing / dry docks
– Third & fourth quarter more representative
2014 (Unaudited)
2Q
3Q
Ship Days
800
600
400
200
4Q
0
Ship Days
Spot (Pool)
2Q
392
551
565
65
92
79
Spot
14,862
23,200
28,524
TC
14,254
14,973
14,640
15
Average
14,776
22,023
26,828
10
6.8
14.2
17.3
(5.6)
(6.1)
(6.0)
1.2
8.1
11.2
Net Income $ MM
(6.0)
0.4
3.4
Cash Balance $ MM
12.8
11.9
19.4
TC
3Q
Spot (Pool)
4Q
TC
Daily Earnings $/d
Revenue $ MM
Opex/ SG&A $ MM
EBITDA $ MM
EBITDA $MM
5
0
2Q
3Q
EBITDA
4Q
19
Potential Uses of Excess Cash
•
Excess Cash: amounts above $12.5 million in Reserve Account
– Expect $20-$25 million sometime during 3Q
– Assuming rates average $25,000/d during slower summer period
•
Permitted uses:
– $10 million bond redemption per 12 month period (2 remaining)
– Acquisition of “Additional Vessels” (Suezmax or MR)
• Suezmax: Few sale candidates, high price expectations
• MRs: still a buyers market despite rate recovery
Excess Cash Projection:
3/31/2015
6/30/2015
9/30/2015
12/31/2015
Excess Cash
7.9
20.9
23.8
37.5
Reserve
12.5
12.5
12.5
12.5
Total Cash
20.4
33.4
36.3
50.0
($ Millions)
20
Ridgebury Aframax Tankers
•
Well-timed December purchase of 2 x 2003 built Sumitomo Aframax vessels
– Immediate, frictionless entry to strong winter market
– Purchase price $23.15 million each
– 1Q15 EBITDA $2.1 million each
•
Purchase funded primarily with short-term financing
– Riverstone debt facility of $22 million per vessel (6% coupon)
– Can be repaid at any time without penalty or fee
•
Attractive purchase candidates for Ridgebury Crude Tankers
– Modern Japanese vessels
– Strong cash flow potential: high current yield, no drydock scheduled until 2018
– Zero takeover friction (no management or pool change, immediate earnings)
•
Management believes that the best use of Excess Cash is to purchase one Aframax
21
Strategy for 2015
•
Strategy flows from our core philosophy
– Focus on returns and shareholder value (measured by IRR and MOIC)
– Not interested in adding assets for the sake of management fees or IPO “growth story”
– Not afraid to turn down capital
•
Currently focused on cash generation and balance sheet improvement
– Not actively seeking additional vessels for purchase
•
Comfortable with spot market strategy for time being
– Could charter in tonnage for shorter periods (generally 1 – 2 years)
– If 3 – 5 year TC market develops, will evaluate charter out opportunities
22
Agenda
1
COMPANY INFORMATION
2
MARKET UPDATE
3
FINANCIAL SUMMARY
4
SUMMARY
5
APPENDIX
23
Investment highlights
Modern, high
quality fleet




High quality fleet of 15 Japanese and Korean built vessels – 7 Suezmax, 2 Aframax, 6 MR
Favourable entry prices: well-positioned with low breakeven and optionality
Vessels employed with leading pools to achieve premium earnings in recovering markets
No unfunded commitments / entire fleet is on water and generating positive daily cash flow
Supportive
market
fundamentals




Zero fleet growth in 2015E means higher rates even in low GDP growth environment
Lower oil prices, growing demand and arbitrage
US crude exports would be positive but are not necessary to our thesis
Limited number of competitors who can raise large amounts of capital




USD 250m committed to date from Riverstone Holdings LLC, a USD 27bn private equity group
Strong management team with long and successful track record in the shipping sector
Management team has personally invested USD 6.7m - fully aligned with all stakeholders
Transparent, simplified management structure with low SG&A to ensure maximum profitability with
no leakage (i.e, no affiliated transactions, etc.)
Exceptional
sponsor and
management
24
Agenda
1
COMPANY INFORMATION
2
MARKET UPDATE
3
FINANCIAL SUMMARY
4
SUMMARY
5
APPENDIX
25
Financials – RT Holdings and Subsidiaries
Income and cash flow statement (USD)
Balance sheet (USD)
3 months ended
December 31, 2014
Full Year 2014
Revenue
Voyage
Time charter
Pool
Total revenues
57,022
1,156,563
26,169,572
27,383,156
1,967,098
11,180,304
53,456,218
66,603,620
Operating expenses
SG&A
EBITDA
Depreciation and amortization
EBIT
Interest expense and financing costs
Net income
-9,889,790
-3,347,388
14,145,979
-5,250,857
8,895,122
-5,752,455
3,142,667
-32,335,289
-8,741,724
25,526,607
-16,896,259
8,630,348
-19,403,281
-10,772,933
Cash flow statement
Cash flow from operating activities
Cash flow from investment
activities
Cash flow from financing activities
Net change in cash
Cash beginning balance
Cash ending balance
7,276,628
-7,101,772
-47,445,087
-303,744,655
47,060,904
6,892,445
21,151,786
28,044,231
319,944,536
9,098,109
18,946,122
28,044,231
31 December 2014
Assets
Current assets
Cash
Other current assets
Total current assets
28,044,231
27,611,508
55,655,739
Non current assets
Vessels, net of depreciation
Other non current assets
Total non current assets
466,957,524
11,879,877
478,837,401
Total assets
534,493,140
Liabilities and Equity
Current liabilities
Total current liabilities
62,483,185
Non current liabilities
Senior secured bond
Term loan, net of current portion
Total non current liabilities
210,000,000
64,302,634
274,302,634
Equity
Total liabilities and Equity
197,707,320
534,493,140
Out of the Cash shown above, $ 13.5 million is treated as restricted cash in the audited accounts; $ 1.5 million as a current asset and $12.0 million as a non current
asset
26
Financials – Ridgebury Crude Tankers LLC
Income and cash flow statement (USD)
Balance sheet (USD)
3 months ended
From inception
December 31, 2014
Revenue
Voyage
Time charater
Pool
Total revenues
5,100
1,156,563
16,116,183
17,277,846
746,980
3,460,680
34,504,422
38,712,082
Operating expenses
SG&A
EBITDA
Depreciation and amortization
EBIT
Interest expense and financing costs
Net income
-5,290,404
-747,930
11,239,511
-3,216,673
8,022,838
-4,583,700
3,439,138
-15,582,681
-2,316,572
20,812,829
-9,195,939
11,616,890
-14,249,742
-2,632,852
7,852,421
2,359,085
-314,997
-178,782,196
0
7,537,425
11,850,772
19,388,196
195,811,307
19,388,196
0
19,388,196
Cash flow statement
Cash flow from operating activities
Cash flow from investment
activities
Cash flow from financing activities
Net change in cash
Cash beginning balance
Cash ending balance
31 December 2014
Assets
Current assets
Cash
Other current assets
Total current assets
19,388,196
15,018,300
34,406,497
Non current assets
Vessels, net of depreciation
Other non current assets
Total non current assets
268,437,036
6,255,110
274,692,146
Total assets
309,098,643
Liabilities and Equity
Current liabilities
Total current liabilities
6,054,037
Non current liabilities
Senior secured bond
Total non current liabilities
210,000,000
210,000,000
Equity
Total liabilities and Equity
93,044,606
309,098,643
Out of the Cash shown above, $ 7.5 million is treated as restricted cash in the audited accounts and as a non current asset
27
Outstanding Bond Issue – Summary of main
terms
Issuer:
Ridgebury Crude Tankers LLC (Marshall Islands)
Parent:
RT Holdings, LLC (Marshall Islands)
Midco:
Ridgebury Holdings LLC (Marshall Islands)
Vessel Owners:
Vessel owning SPVs
Guarantors:
Parent, Midco and Vessel Owners
Principal Amount:
USD 210 million
Purpose of the Bond
Issue:
(i) fund the Reserve Account by minimum USD 10m and (ii)
fund the acquisition of the Security Vessels
Status:
1st lien senior secured bonds
Coupon:
7.625 % p.a., semi-annual interest payments
Issue price:
100% of par value
Settlement Date
Expected to be 20 March 2014
First Interest
Payment Date:
20 September 2014, 6 months after the Settlement Date
Final Maturity Date:
20 March 2017, 3 years after the Settlement Date
Call Options:
NC-1.5, year 1.5-2 @ 104, year 2-2.5 @ 102 2/3, year 2.5-3 @
101 1/3
Listing of Bonds:
Nordic ABM
Trustee:
Security:
Security Vessels:
7 Suezmax crude tanker vessels
Minimum Asset
Cover Ratio:
Issuer to maintain, on a consolidated basis, an Asset
Cover Ratio of minimum 125%.
Minimum Value
Adjusted Equity
Ratio of Parent:
Parent to maintain, on a consolidated basis, a Value
Adjusted Equity Ratio of minimum 25%
Use of Excess Cash:
Excess Cash may be used for:
i. Redemption of up to USD 10m of bonds during each 12
month period at 100% of par value
ii.acquisition of Additional Vessels, provided that the
Asset Cover Ratio immediately after such acquisition is
above 165%
Excess Cash:
Cash standing on the Reserve Account above USD 12.5
million
Account Structure:
Earnings Account, Retention Account, Operating Account,
General Expenses Account and Reserve Account
Change of Control:
Put @101% if (i) Parent’s ownership in Midco <100%, (ii)
Midco’s ownership in the Issuer <100%, or (iii)
Riverstone’s ownership in Parent <50% pre IPO, <34%
post IPO
Norsk Tillitsmann ASA
Other Items
(Issuer):
Standard 1st lien security, incl. inter alia mortgage over the
Security Vessels, share pledges in Vessel Owners, account
pledges, assignment of earnings, pool agreements,
employment contracts, management agreements and
insurances
i. Amount standing on the Reserve Account to be
minimum USD 7.5 million at all times
ii.Standard terms and conditions, including dividend
restrictions and financial indebtedness restrictions
iii.Any Additional Vessels to be included as security for
the bonds
Manager:
DNB Markets
Please see Term Sheet and Offering Memorandum for further details
28
Current Loan to Value
Vessel
No.
Name
Year Built
Country
Estimated Fair Market
Value
1
Ridgebury Lessley B
2013
Korea
$65.8MM
2
Ridgebury John Z
2009
Korea
$53.9MM
Total Vessels
$331.7MM
Bond Outstanding
$200.0MM
LTV
3
Ridgebury Nicholas A
2007
Japan
$46.5MM
4
Ridgebury Astari
2002
Japan
$26.8MM
Bond (net of cash)
5
Ridgebury Captain D
2007
Korea
$47.3MM
LTV (net of cash)
6
Ridgebury Mary Selena
2006
Japan
$43.6MM
7
Ridgebury Lindy B
2007
Japan
$47.8MM
Total Market Value of Vessels
60.3%
$179.6MM
54.1%
$ 331.7MM
Asset values from VesselValue.com as of 31st Mar 2015
29
Ridgebury Crude Tankers - Financial Update
•
Illustration for 2015 on the basis of current TC rates:
–
First quarter results trending above forecast in all sectors
2015 P
Daily Earnings $/d
Suezmax
(Bond Issuer)
27,500
Aframax
22,000
MR
Total
Ridgebury
15,000
Revenue $ MM
69.5
15.8
32.4
117.7
Opex / SG&A $ MM
(22.1)
(5.8)
(15.6)
(43.4)
EBITDA $ MM
47.4
10.1
16.8
74.3
Net Income $ MM
17.4
4.6
5.0
27.0
Free Cash Flow $ MM
32.0
7.3
3.8
43.1
30