Aker Philly, AMSC and Apollo launch Philly Tankers

JUNE 10, 2014 — Aker Philadelphia Shipyard and financial sponsors, including American Shipping Company and funds affiliated with Apollo Global Management, are creating a what's described as a "pure play Jones Act shipping company."

To be called Philly Tankers, it has successfully secured equity commitments necessary to finance the purchase of two product tankers from Aker Philadelphia with deliveries in 2016 and 2017 (with options for two more) and will have a post-money market capitalization of $127.5 million. Together with best-in-class partners, Philly Tankers will operate and charter the vessels in the Jones Act market.

"We are delighted to see so much interest in Philly Tankers. The company offers pure-play exposure to an increasingly strong market and is targeting growth through a combination of newbuilds, acquisitions of existing vessels, and potentially through market consolidation," says Kristian Rokke, Chairman of Aker Philadelphia Shipyards. "There are two key trends currently shaping the Jones Act market - the tight oil revolution, which has increased demand for product tankers, and a surge in containership orders, which has constrained shipyard capacity. Philly Tankers is well positioned to benefit from the effects of these trends by offering customers modern tonnage in a supply constrained market, as well as reliable operations and substantially improved fuel-efficiency versus the existing fleet."

As part of the transaction, AKPS will invest $58.5 million for 54% of the shares, which AKPS expects to fund through existing cash and proceeds from operations. The remaining sponsors will invest $59.0 million for 46% of the shares at a subscription price of $1,000.00 per share.

American Shipping Company ASA says its investment will be $ 25 million for a 20% stake

Aker Philadelphia and Philly Tankers, through their U.S. subsidiaries, will enter into binding shipbuilding contracts for the first two product tankers, designated as AKPS Hulls 025-026. The total contract value is approximately $250 million, excluding construction period financing, initial owner expenses, G&A, and transaction costs. The anticipated profitability of the shipbuilding project for the shipyard is said to be in-line with previous guidance for Hulls 021-030. An option agreement will also be signed for two identical product tankers with deliveries in 2017, designated as AKPS Hulls 027-028, on substantially the same terms and conditions as AKPS Hulls 025-026.

The vessels will be 50,000 dwt product tankers based on a proven Hyundai Mipo Dockyards (HMD) design that incorporates numerous fuel efficiency features, flexible cargo capability, and the latest regulatory requirements. The vessels will be constructed with consideration for the use of LNG for propulsion in the future. The vessels will be identical to the vessels currently under construction at AKPS that will be included in the AKPS-Crowley joint venture.

Philly Tankers expects to hire a best-in-class technical operator prior to delivery of the first vessel to arrange for maintenance and crewing of the vessels, and to ensure that the vessels satisfy all regulatory requirements, among other things. Philly Tankers has a number of attractive options for commercial management and will consider all its alternatives when seeking and arranging employment for the vessels.

Prior to delivery of the first vessel, Philly Tankers will have an ownership and corporate structure that is fully compliant with all applicable Jones Act requirements. Philly Tankers will explore value-enhancing initiatives such as the establishment of a Master Limited Partnership. Philly Tankers will have a Board of Directors comprised of independent and investor-designated members. Philly Tankers will initially list its shares on the Norwegian OTC, with a target of a U.S. listing by mid-2016.

Closing of the Transaction remains subject to satisfaction of customary conditions precedent, including the execution and delivery of satisfactory definitive documentation, and the approval by the general meeting of American Shipping Company of its participation in the Transaction. It is expected the Transaction will be closed in mid-July 2014.

Arctic Securities and Pareto Securities have acted as Joint Lead Managers for the Transaction. Advokatfirmaet BA-HR DA and Blank Rome LLP have acted as legal adviser to AKPS in connection with the private placement. Wiersholm has acted as the legal adviser to the Joint Lead Managers.