Shipping Deal Tanks, Will Resurface

Struggling Hvide Marine Inc. recently pulled its roughly $300 million new high yield issue that was planned to take out its $270 million in bank debt, according to sources. The deal is slated to re-surface in mid-July.

One source said he had heard price talk of 13% from one party and a staggering 15.5% from another.

A spokesman for the Fort Lauderdale, Fla.-based company declined to comment. Hvide, with a $25 million market cap, and shouldering about $600 million in total debt, has not announced the new high yield offering. Hvide had until last Wednesday, June 30, to satisfy its bank lenders - Citibank and BancBoston Corp. - or secure a third extension of the banks' covenants-violation waiver. No news was forthcoming from the company about an extension, sources said.

The offshore services company has been in violation of the covenants since March 31.

The tranche is being privately marketed, said Evan Templeton, a high yield analyst at BancBoston Robertson Stephens. Underwritten by Donaldson, Lufkin & Jenrette, it will be structured as a payment-in-kind issue for three years, so the notes will essentially be zero coupons for that period, he said.

In terms of Hvide's existing $300 million in 8.375% senior notes, the company should have no problem making the coupon payments, Templeton said. On Hvide's plate are $25 million in interest payments over the next three years and $20 million per year in capital expenditures and maintenance. But, with its current $60 million in annual cash flow, the company will be able to cover those expenses, he said.

Last week, the bonds had offers fluctuating between the low 40s and the low 50s last week, and had a trade at 46, sources said.

Templeton and the Hvide spokesman both acknowledged the vultures' descent on the company's high yield debt. "People are definitely playing in this," Templeton said.

"Yes, [the vultures] call," said the spokesman.

Reportedly, Loomis Sayles & Co. owns nearly half of the senior notes.

Meanwhile, the company has been busy selling assets, with its most recent transaction announced two weeks ago. For an undisclosed amount, Cal Dive International Inc. purchased Hvide's 56% equity interest in a $39 million anchor handling/subsea construction vessel.

Hvide's aggressive divestiture program comes in the wake of the company appointing one of its directors, Jean Fitzgerald, to the positions of chairman and CEO.

"Fortunately, it looks like they're doing something finally," commented Jim Rollyson, an equity analyst at Raymond James. The company is likely securing 80 cents to 85 cents on the dollar for what it paid for the assets, though, he noted.

"We get calls everyday from people anxious to look at the assets," said Jim Harris, president of Seneca Financial Group, which is advising Hvide on its restructuring efforts.

Hvide is a classic case of a company in a cyclical industry heavily leveraging itself up to make acquisitions, Harris remarked.

- Judy Radler Cohen