Survey of Shipping Primary Equity Offerings in the 2009 U.S. Public Market

Frode Jensen, partner and Francois Janson, senior counsel, and are based in our New York office.

2009 was a challenging year for many shipping companies throughout the world. Despite a difficult environment, 14 companies completed 21 primary equity offerings in the U.S. public market.1

This survey reviews the registration documents filed with the U.S. Securities and Exchange Commission (SEC) in connection with these transactions and the principal terms of the related offerings.2

Highlights of the Survey

Only one issuer was a U.S. corporation headquartered in the United States. 12 issuers were foreign private issuers organized outside the U.S.; one issuer was a foreign corporation with headquarters in the U.S. 10 issuers were organized as corporations; four were limited partnerships. 10 issuers consummated 14 transactions through firm commitment underwritings. Three issuers completed five successful at-the-market (ATM) offerings. One issuer completed two successful standby equity distribution agreement (SEDA) transactions. Six issuers went to market more than once in the year, including one issuer which completed three separate underwritten transactions. All the deals were primary shelf offerings on Forms S-3 or F-3. None of the deals included secondary sales by existing shareholders. Jurisdiction of Organization and Principal Place of Business of Issuers

The predominant jurisdiction of organization was the Marshall Islands.

Of the 14 issuers accessing U.S. markets, only one issuer, K-Sea Transportation Partners L.P. (KSP), was organized in the United States. KSP is a U.S. domestic Jones Act carrier and is therefore required by U.S. law to be organized in the U.S.3 Of the remaining 13 issuers, 11 were organized in the Marshall Islands, one in Bermuda and one in Liberia. All but one of these 13 issuers, Eagle Bulk Shipping Inc., have executive offices outside the U.S. The executive offices of these issuers were located in Bermuda, Greece and the Channel Islands (Jersey).

The disclosure documents typically state that: (i) so long as the issuer is incorporated outside the U.S. and its "shipping income"4 is attributable to transportation exclusively between non-U.S. ports, it will not, solely by reason of offering its securities in the U.S., be subject to U.S. income taxation; (ii) under applicable U.S. tax laws, no U.S. tax is imposed on foreign issuers solely because their equity securities have been offered in the U.S. or because their shareholders may reside in the U.S.; and (iii) there is no restriction on non-U.S. companies filing registration statements to sell securities in the U.S., and the conduct of an offering in, or even a listing on a securities exchange in the U.S. does not, alone, subject an issuer to U.S. taxation.

Business of Issuers

Nine of the 14 issuers were primarily operators of dry bulk vessels. The other five issuers primarily own and operate fleets transporting oil, gas and petroleum products.

Use of Proceeds

The most common uses of proceeds from equity offerings in 2009 were to repay indebtedness, strengthen the balance sheet in order to remedy or avoid breach of loan covenants, fund external growth and fund newbuilding programs.

Exchange Listings

Of the 14 issuers, nine were listed on the New York Stock Exchange (NYSE), three were listed on the NASDAQ Global Market and two were listed on the NASDAQ Global Select Market. One issuer, Paragon Shipping Inc., moved from the NASDAQ Global Market to the NYSE in March 2010.

Type of Registration Forms

Of the 14 issuers, 12 filed registration statements on SEC Form F-3 and two filed registration statements on Form S-3.

Form F-3 is only available to be used by so-called "foreign private issuers."5 Foreign private issuers are subject to certain reduced disclosure requirements, including, specifically, with respect to individual executive...