Legg Mason’s EnTrustPermal to list $250m direct lending investment trust to capitalise on US$80bn shipping industry capital needs
Blue Ocean Maritime Income plc (the “Company”), a closed ended company which intends to operate as an investment trust, announced its intention to launch an initial public offering (“IPO”) on the London Stock Exchange (the “LSE”), by way of a placing and offer for subscription targeting the issue of 250 million ordinary shares (the “Ordinary Shares”) at an issue price of US$1.00 per Ordinary Share. A prospectus in connection with the IPO (the “Prospectus”) has been published today and will shortly be made available on the Company’s website: www.blueoceanplc.com.
The objective of the Company will be to generate long-term, sustainable shareholder returns, predominantly in the form of income distributions, from direct lending and similar financing opportunities to vessel owners and operators, and other maritime businesses.
· Debt financing (predominantly senior secured) to small to medium-sized, high quality, privately-owned shipping companies
· Primarily originates and/or invests in first lien loans secured by commercial ships
· Target NAV total return of 8-10% per annum over the medium term on opening NAV
· Shipping industry has a debt financing requirement of approx. US$80bn per annum
· Historically approx. 80% of shipping finance was provided by bank financing – since 2008 this has significantly reduced
· Led by Svein Engh, Managing Director of EnTrustPermal and Portfolio Manager of the firm’s Blue Ocean Funds, with over 30 years’ experience in financial services and the shipping sector
· The Blue Ocean strategy has already successfully deployed over US$300m since September 2016, financing 55 vessels
· Diversified portfolio of investments that will focus on all shipping sectors while seeking to maintain a countercyclical approach
· Financing opportunities are anticipated to come with significant downside protection given loan-to-ship values and historically low asset values
Svein Engh, Portfolio Manager, Blue Ocean Maritime Income, said: “Shipping is a large and diverse industry, which creates many significant investment opportunities. While we continue to see capital inflow to direct lending vehicles and investment funds in sectors such as real estate or infrastructure, the maritime financing sector is in a different position; values are low, and the competition is limited, resulting in attractive risk-adjusted yield opportunities.”
“The banking dislocation is driving our opportunity and we are stepping into the area where banks used to be very active but are now restricted due to Basel regulations and other factors. As a non-bank lender, we can construct our portfolio in a countercyclical manner in the privately-owned segment of the shipping market. We are completely focused on the industry, with our team of shipping experts having a combined 60 years of experience.”
Roger Harle, Senior Vice President at EnTrustPermal, added: “We are delighted to announce the proposed IPO of Blue Ocean Maritime Income plc. With Svein’s experience in this sector, along with the support from the investment team, we have the opportunity to target high-quality maritime assets in the private market.”
“We believe this is a unique and compelling investment opportunity, providing investors the chance to access an often-overlooked market, through a highly experienced investment team.”
European banks have historically provided over 80 per cent. of the industry’s financing, but this has significantly reduced since 2008 due to regulatory changes and competitive pressure. The Investment Manager estimates that the shipping industry has a financing requirement of approximately US$80bn per annum and believes the withdrawal of the traditional European banks has caused a massive capital shortfall, particularly for small to medium-sized shipping companies. This capital shortfall has been combined with a prolonged down cycle in shipping that has depressed asset values.
The Company intends to target direct lending opportunities to vessel owners and intends to seek to exploit the twin dislocations in the shipping and European banking sectors by serving as an alternative source of liquidity to those companies.
The Company intends to target high quality businesses that provide steady, predictable cash flows, and low correlation to equity and bond markets, along with a proven track record. With shipping rates for vessels driven by the supply and demand for each vessel type, the rate environment across different sectors tends to be generally uncorrelated to global GDP, and the Company will aim to offer investors steady, predictable cash flows, the inflation protection typically associated with real assets and a low correlation to equity and bond markets.
Whilst not forming part of its investment policy, the Company intends to target a NAV total return to shareholders of 8-10% per annum over the medium term (based on the NAV as at the start of each financial period). Whilst also not forming part of its investment policy, the Company will target dividends which equates to a yield of at least 3% per annum (equivalent) on the issue price in respect of the period from Admission to 31 December 2019, and at least 7% per annum on the issue price in respect of each subsequent year following 1 January 2020.
EnTrustPermal Ltd. (the “Investment Manager”), serves as the investment manager and AIFM of the Company and is authorised and regulated by the Financial Conduct Authority (the “FCA”). The Company has entered into the Investment Management Agreement with the Investment Manager, pursuant to which the Investment Manager manages the Company’s investments and assets in accordance with the Company’s investment policy. Under the terms of the Investment Advisory Agreement, the Investment Manager has delegated discretionary investment authority over the assets of the Company to EnTrustPermal Partners Offshore L.P. (the “Investment Adviser”) and has authorised the Investment Adviser to manage the Company’s portfolio on a day to day basis and to perform related services. The Investment Adviser is registered as an investment adviser with the US Securities and Exchange Commission.
The Company will apply to the LSE for its Ordinary Shares to be admitted to trading on the Specialist Fund Segment of the Main Market of the LSE.
As one of the world’s largest investors in alternative investment strategies with US$20.7bn in total assets, EnTrustPermal, an affiliate of Legg Mason, has the global talent, scale and resources to bring clients meaningful innovation in a dynamic industry. With histories dating back to 1997 and 1973 respectively, EnTrust and Permal combined their deep industry knowledge and expertise in 2016 in an effort to lead the way forward in alternative investing, creating EnTrustPermal.
With 11 offices worldwide, EnTrustPermal, provides investment solutions to a global investor base comprised of public, corporate and multi-employer pension funds, foundations, endowments, sovereign wealth funds, insurance companies, private banks, family offices and high net worth individuals.
PUBLICATION OF THE PROSPECTUS
A copy of the Prospectus will shortly be submitted to the National Storage Mechanism and be available for inspection at www.blueoceanplc.com.
Unless the context otherwise requires, capitalised terms used in this announcement have the meanings given to them in the Prospectus.
Each of the times and dates set out below and mentioned elsewhere in this announcement may be adjusted by the Company, in which event details of the new times and dates will be notified to the FCA and the London Stock Exchange. References to a time of day are to London time.
|Publication of Prospectus and commencement of the Placing and Offer for Subscription||17 September 2018|
|Latest time and date for receipt of Offer for Subscription Applications under the Offer for Subscription||3.00pm on 16 October 2018|
|Latest time and date for receipt of commitments under the Placing||11.00am on 18 October 2018|
|Publication of results of the Placing and Offer for Subscription||19 October 2018|
|Commencement of dealings in the Ordinary Shares on the Specialist Fund Segment||As soon as practicable after 8.00am on 23 October 2018|
Source: EnTrustPermal Ltd.