A.P. Møller - Mærsk A/S Tapping the Debt Capital Markets via Danske Markets. 14 September 2011

Transcription

1 A.P. Møller - Mærsk A/S Tapping the Debt Capital Markets via Danske Markets 14 September

2 Introduction to the Speakers Bo Wetterstein, Danske Bank Senior Vice President and Global Head of Debt Capital Markets since May 2007 Joined Standard Chartered Bank in 1990 and has worked with International Capital Markets in Westdeutsche Landesbank, ABN AMRO and Nomura Securities in London prior to joining Danske Bank in August 2006 Holds a Master Degree in Economics & Business Administration (Cand.Merc.) from CBS Stanford Executive Program Martin Larsen, A.P. Møller Mærsk Senior Director and Head of Corporate Treasury Group Finance and Risk Management 8 years with A.P. Møller Mærsk in various positions 2

3 Presentation overview Danske Markets Debt Capital Markets Section 1 Status of Capital Markets Section 2 APMM Intro Section 3 APMM Inaugural Euro Bond deal (2009) Section 4 APMM EUR 500m 4.375% 2017 case study Section 5 Q&A 3

4 Global Debt Capital Markets (DCM) in Danske Bank: DCM is responsible for Danske Bank group clients issuance of debt in the capital markets. Danske Markets DCM is the market leader in the Nordic region. We have a deep penetration in the Nordic area and we are expanding our business in Europe and the US. Our strong market position is a result of a dedicated approach to both issuers and investors who are being served by our specialists team concentrating on servicing our clients in both the primary and secondary market. DCM consists of more than 60 devoted experts in the areas of Origination, Syndication, Sales, Trading and Research. We are responsible for all New Issues, Sales, Trading and counselling of credit products and derivatives. 4

5 Global Head of DCM Bo Wetterstein Head of Credit Research Thomas Hovard - 7 people based in Copenhagen, Stockholm and Oslo Head of Syndicated Loans Richard Griffiths - 8 people based in London Global Head of Origination Jens Nielsen - 16 people based in Stockholm, Copenhagen, Helsinki and Oslo Global Head of Syndicate Jeremy Spinney - 6 people based in Copenhagen Head of DCM Trading Rune Heinrichson - 8 people based in Copenhagen, Stockholm and Oslo Head of DCM Sales Bo Wetterstein - 22 people based in Stockholm, Copenhagen, Dublin, Helsinki and Oslo Origination Syndicated Loans Syndicate Research Sales Trading 5 5

6 Global Debt Capital Markets (DCM) Core Focus Areas: International Capital Markets Corporate Bonds Financial Institutions Covered & Senior Sovereign, Supranational and Agency Issuers Nordic Bond Markets SSA s Corporates Banks / Financial Institutions International Private Placements EMTNs and US Private Placements Investor /Event Driven Structured Products Valhalla I & II Emerging Market Currencies (TRY, RUB, ZAR, MXN, etc.) 6

7 Financial Markets has in August and the start of September been characterised by fear and extreme volatility. SEK 1,000,000,000 NOK 100,000,000 SEK 1,000,000,000 SEK 1,000,000,000 NOK SEK 500,000,000 EUR 1,000,000,000 SEK 500,000, % due 2016 FRN due 2016 FRN due 2013 FRN due % due 2012 FRN due % due 2013 FRN due 2014 SSA -MTN SSA -MTN Corporate Corporate Corporate Corporate SSA Corporate Bookrunner Bookrunner Bookrunner Bookrunner Bookrunner Bookrunner Bookrunner Joint Bookrunner September 2011 September 2011 September 2011 September 2011 September 2011 September 2011 September 2011 September 2011 EUR 1,000,000,000 SEK 2,000,000,000 EUR 2,000,000,000 SEK 1,000,000,000 EUR 1,000,000,000 NOK 200,000,000 NOK 300,000,000 NOK 500,000,000 NOK 500,000, % due 2016 FRN due % due 2014 FRN due % due 2015 FRN due % due % due % due 2013 Covered Covered - SEK Covered Covered Covered SSA -MTN SSA -MTN SSA -MTN Corporate Bookrunner Bookrunner Joint Bookrunner Bookrunner Joint Bookrunner Bookrunner Bookrunner Bookrunner Bookrunner September 2011 August 2011 August 2011 August 2011 August 2011 August 2011 August 2011 August 2011 August 2011 * 7

8 Presentation overview Danske Markets Debt Capital Markets Section 1 Status of Capital Markets Section 2 APMM Intro Section 3 APMM Inaugural Euro Bond deal (2009) Section 4 APMM EUR 500m 4.375% 2017 case study Section 5 Q&A 8

9 Credit Markets 2011: Are we approaching a new Lehman? 9

10 Euro Debt Crisis getting really serious 25 % 20 Germany 10Y Yield France 10Y Yield Italy 10Y Yield Denmark 10Y Yield Greece 10Y Yield Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 10

11 Volatility high But no Lehman... 11

12 Banks trading wider than post- Lehman environment 350 bps 300 itr axx Senior Financials Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan Source: EcoWin, Danske Markets

13 High credit spread in European bond markets But again still far from Lehman- highs Euro market spread to swap 13 Source: iboxx, Danske Markets

14 Presentation overview Danske Markets Debt Capital Markets Section 1 Status of Capital Markets Section 2 APMM Intro Section 3 APMM Inaugural Euro Bond deal (2009) Section 4 APMM EUR 500m 4.375% 2017 case study Section 5 Q&A 14

15 A.P. Moller Maersk Group: At a glance Diversified global conglomerate with activities focused in energy, transportation & retail 100+ years of financial strength: established 1904 Headquartered in Copenhagen, Denmark Listed on NASDAQ OMX Copenhagen Market cap of USD 25bn 14/ Approximately 108,000 employees in around 130 countries Stable and consistent ownership structure Market leading positions within shipping, terminal and focused retail activities Strong business portfolio within energy and offshore business Focus on investments in core segments such as oil and gas activities and APM Terminals Committed to conservative capital structure and funding profile, matching that of a strong investment grade company over the cycle 15

16 A.P. Moller Maersk Group milestones 1904: 1928: 1928: 1959: 1962: 1964: 1967: 1972: 1972: Company established with a general cargo ship First liner service between US and Asia The first tanker vessel was added to the Maersk fleet Opening of the new shipyard at Lindø (Denmark) Oil exploration and production activities initiated Dansk Maersk Supermarked Supply (retail business) Service established established Maersk Contractors established Maersk Oil first oil in the North Sea 1975: 1977: 1994: 1999: 1999: 2005: 2005: 2008: 2009: 2010: First container -ised vessels Mercantile now Maersk Logistics established Maersk Oil commenced oil production in Qatar Safmarine Container Lines (SCL) acquired Sea-Land acquired P&O Nedlloyd acquired Oil and gas interests of Kerr-McGee UK acquired Broström acquired Norfolkline sale to DFDS (APMM retains 31% of combined company) Acquisition of SK do Brasil Ltda. 16

17 A.P. Moller Maersk Group: A diversified conglomerate with a balanced portfolio A. P. Moller - Maersk Group Oil & Gas Container shipping Tankers, offshore & other shipping Terminals Retail Shipyards / Danske Bank & other Revenue Operating cash flow Net result 9% 3% 16% 0% 23% 22% 4% 4% 10% 18% 47% 7% 7% 11% 18% 5% 47% 49% 5 year average figures Excludes eliminations etc 17

18 Group Finance & Risk Management Group Finance & Risk Management Jan B. Kjærvik Corporate Treasury Martin Larsen 22 colleagues (4 based in Singapore) M&A and Projects Karl Thorngren 5 colleagues Financial Markets Sander Fynboe 5 colleagues ( 1 based in Singapore) Economic Analysis Graham Slack 3 colleagues Insurance and Risk Lars Henneberg 11 colleagues Reporting/Settlement Lars T. Christensen 14 colleagues 18

19 A.P. Moller Maersk Group: Group Finance & Risk Management M& A Projects Centre of excellence in executing M&A transactions, managing investment banks and Group Investment Processes Economic Analysis Bringing the outside inside the Group by explaining macro- and oil picture to relevant internal stakeholders Funding Secure adequate long term funding and liquidity buffers to the Group to support Group strategy Manage Group s bank relationships Optimize debt/liquidity position and risk management of the Group Cash management Manage cash management infrastructure and through cash flow forecasting minimizing idle cash positions Treasury Manage and execute the Group s foreign exchange and interest rate positions Reporting and Settlement Settlement of treasury transactions and reporting on financial items of the Group Risk Managing of Group financial risks and developing an ERM infrastructure and mindset in the Group Insurance Adequate insurance of Group assets and optimal risk retention levels Maersk Treasury Center in Singapore is a branch of GFRM covering various activities 19

20 Presentation overview Danske Markets Debt Capital Markets Section 1 Status of Capital Markets Section 2 APMM Intro Section 3 APMM Inaugural Euro Bond deal (2009) Section 4 APMM EUR 500m 4.375% 2017 case study Section 5 Q&A 20

21 Dramatic change in business conditions in USD/FFE 3,500 3,000 2,500 2,000 1,500 Initiative kicked off: Weathering the Storm jun-2008 okt-2008 feb-2009 jun-2009 okt-2009 Status primo 2009 Monthly operational cash flow halved Container freight rates dropped 40% - USD ~10 m loss each day Short term liquidity situation - severe reduction in buffers Support from traditional financing sources uncertain Major counterparty risk issues where to place your deposits? Container rates 21

22 Outlook for APMM s traditional funding sources early 2009 General bank market Leasing International banks were aiming to reduce their balance sheet and many had stopped lending Covenants are tightening and terms generally deteriorating, putting pressure on overall loan portfolio => There was VERY limited appetite for increasing funding relationship The combination of limited liquidity and very low profits (even losses) in the banking market reduced leasing capacity to a minimum Leasing also draws on bank lines, thereby limiting the potential for normal lending Equity risk premium increased Export credit agencies Ship finance institutions ECA s in general only provide commercial risk cover and depend on bank market to provide liquidity to the transactions Structural issues due to high activity in the prior years and facing a shipping industry in distress indicated a need for further diversification Alternatives to be considered in order to prepare APMM for a new financial order 22

23 Alternative global funding opportunities in 2009 Eurobond Euro corporate market saw record setting issuance in 2009 RATED International Public Term Funding Sterling The Sterling market offered competitive financing for maturities over 10 years USD Traditionally the deepest source of funding globally with maturities up to 30 yrs Required rating Nordic Small niche market where we would expect to be able to raise up to DKK 2 bn US Private Placement Private placement market generally difficult in 2008, but saw a return to normalcy in 2009 Alternative Sources of Liquidity German Private Placement Schuldschein market very active Focus on German issuers Other European Private Placement Selected opportunities in the Euro and sterling markets, based on bilateral agreements Nordic Private Placement Limited interest from professional investors in part due to attractive alternatives 23

24 Eurobond market posed a unique window for APMM Q Historical funding sources The Eurobond market Banks limited appetite during the crisis Leasing also drawing on bank lines Ship financing crisis caused industry distress Export Credit Agencies only commercial risk cover Indicated a need for further diversification iboxx corporate spreads Rating not required Unrated corporates issued bonds during September 2009 Attractive terms Low all in pricing (incl. new issue premium and premium for no rating) Tenors exceeding the unsecured bank market Cumulative weekly supply Corporate bond spreads tightened Volume had reached record levels 24

25 2009: APMM successfully entered the bond market EUR bond October 2009 Size: EUR 750m Tenor: 5 years Coupon: 4.875% Spread: M/S +205bp Denominations: EUR 50k+1k Rating: Unrated Security: Pari passu with other senior unsecured debt Structure: Change of control put option Listing: Luxembourg & Copenhagen Bookrunners: Danske, JPMorgan, HSBC, ING & Nordea NOK bond December 2009 Size: NOK 2 bn NOK 2 bn Tenor: 5 years 7 years Coupon: Spread: Nibor + 185bps M/S bps Denominations: NOK 500,000 Rating: Unrated Security: Pari passu with other senior unsecured debt Structure: Change of control put option Listing: Luxembourg Bookrunners: Danske, Nordea & SEB Strong reception from investors for inaugural issues EUR bond was 6.5x oversubscribed NOK bond one of the largest foreign issues in Norwegian market EUR bond tightened app. 20 bps in secondary market, enabling the issue of NOK bond tighter than original EUR pricing APMM s decision to issue bonds has positively affected our dialogue with our commercial banks. 25

26 By the end 2009, the Group is well- positioned to emerge from the storm in good shape Cash flow generation Funding USD billion 10 Investment cash flow Operating cash flow Sale of treasury shares USD 1.6 bn Issue of EURO and NOK bonds USD 1.8 bn Funding Sources Total interest-bearing debt USD 21.2 bn (2008 USD 20.1 bn) Net interest-bearing debt USD 18.1 bn (2008: USD 15.6 bn) USD billion Re-payment schedule for drawn facilities Corporate bonds Bank loans, Export Credit Agencies etc. 6 7% 4 27% Bank loans, Export Credit Agencies etc. Bonds >2015 5% 61% Committed undrawn facilities Committed unddrawn investment specific loans Liquidity buffer (cash and cash equivalents, securities and committed undrawn facilities) USD 10.9 bn, of which committed undrawn facilities constituted USD 8.8 bn 26

27 Presentation overview Danske Markets Debt Capital Markets Section 1 Status of Capital Markets Section 2 APMM Intro Section 3 APMM Inaugural Euro Bond deal (2009) Section 4 APMM EUR 500m 4.375% 2017 case study Section 5 Q&A 27

28 Successfully out of troubled water with a strong platform for future growth USD/FFE 3,500 3,000 2,500 2,000 Weathering the Storm Refinancing of large RCF Sale of treasury shares Bond issuances Accelerate to win Status mid 2011 Operational cash flow of USD 10bn in 2010 Deleveraged ~ USD 7bn in net debt since peak in 2009Q2 (USD 5.5bn in 2010) Liquidity buffer of USD 14.5bn end 2010 Increased dividend from DKK 350 to 1000 Market capitalisation USD 41bn Time for new investments after limited new commitments since 2008Q3. Committed close to USD 10 bn in last 9 month 1,500 jun-2008 jan-2009 aug-2009 mar-2010 okt-2010 Container rates Back to New normal in

29 Market timing itraxx Main Credit index based Credit Default Swaps 150 itraxx Main Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 itraxx Main now trading at 190bps In the month leading up to the APMM transaction credit markets had performed strongly and we had had decent activity in the primary market. October saw 28 issues (Unrated + Inv. Grad) for a total volume of EUR 13.5bn, and the first two weeks of November had brought 11 deals for a volume of EUR 5bn. However not all was good. Market participants were increasingly concerned over the timing and availability of an IMF/EFSF package for the Republic of Ireland. This created a lot of volatility and price sensitivity which had to be managed properly

30 2010: Building the EUR curve Strong market allowed APMM to issue 7-year EUR bond at attractive level Spreads had tightened significantly since inaugural issue in October 2009 Investors were more familiar with APMM, allowing longer issue Issued under APMM s EMTN programme (set up January 2010) 35 EURbn Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 30

31 New Issue Process Phase 1 Planning Choose Lead Managers Investor Presentation Roadshow Due Diligence Lead Managers decide on strategy Soft Sounding Go / No-go call Bloomberg announcement to sales Books open (Price Guidance) Updates to market Phase 2 Preparation Phase 3 Execution Conference call with the issuer When satisfactory subscription is reached Books Close in (20) minutes (Message sent to investors) Books Close (Message sent to investors) Book is checked for quality and sensitivity On the back of the book Lead Managers will recommend size / price Send new price guidance to investors If price is altered Announce size and price Allocation process Preferences for Investors, Regions or types is agreed upfront Suggested allocation sent to Issuer for input Announcement of allocation and pricing in [30] minutes Input (hedges from investors) Dry run with issuer Pricing Swap (If needed) Billing and Delivery Draw-down due diligence call Phase 4 - Closing Documentation Settlement 31

32 Execution Having conducted the two team roadshow on the Monday and Tuesday, leads spent Wednesday and Thursday to gather investor feedback and monitor the increasingly fragile market Backed by highly constructive feedback, leads and APMM agreed that there was minimal execution, and subsequently on the Friday open books for a 7 year deal with a price guidance mid-swaps plus 175 bps area. The order book grew rapidly, and exceeded EUR1bn within the hour. After confirming to investors that the issue size would not exceed EUR500m and that books would close at short notice, orders continued to grow to in excess of EUR1.6bn with 215 accounts involved. Mindful of the ongoing weak market sentiment, and with the knowledge that APMM someday would want to return to the Euro market, the leads and issuer chose to set pricing at MS +175bp, giving a coupon of 4.375%, to ensure stable aftermarket performance

33 APMM s second EUR bond issue 7 year EUR 500m bond Size: EUR 500m Tenor: 7 years Coupon: 4.375% Spread: MS bps Denominations: EUR 50k+1k Rating: Unrated Documentation: EMTN programme Security: Pari passu with other senior unsecured debt Structure: Change of control put option Listing: Luxembourg Bookrunners: Barclays Capital, BNP Paribas, Danske Bank, HSBC, RBS Key take-aways Builds secondary curve for APMM Longer financing than generally available in bank market (unsecured) Strong orderbook of EUR 1.6bn Good investor diversification, showing effect of investor dialogue Geographical distribution Investor allocation 33

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36 Disclaimer This presentation has been prepared by Danske Markets for information purposes only and should be viewed solely in conjunction with the oral presentation provided by Danske Markets. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Markets research analysts are not permitted to invest in securities under coverage in their research sector. This presentation is not intended for retail customers in the UK or any person in the US. Danske Markets is a division of Danske Bank A/S, which is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright (2008) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission. 36