Header image

Transportation Sector Advisory Insights: Navigating the storm

Selected highlights of sector-specific advisory activity happening across North America right now.

Navios Maritime Acquisition ship-mortgage notes lawyer up as maturity approaches

An ad hoc group of Navios Maritime Acquisition Corp 8.125% first priority ship-mortgage noteholders has organised with Akin Gump as legal counsel, according to two sources familiar with the situation. Given that the notes mature on 15 November, 2021, the group is looking to explore a maturity extension or related transaction, sources added.

Navios’ capital structure also includes credit facilities with various commercial banks with a total outstanding balance of US$200 million, according to SEC documents. As of 30 June, no amount was available to be drawn from the company’s facilities. The owner and operator of tanker vessels also listed US$68.5 million of cash and restricted cash.

Earnings-wise, revenue increased by US$53.6 million, or 91.6% to US$112.2 million for the three-month period ended 30 June, according to SEC filings. The topline was bolstered by an 8.1% increase in revenue due to the acquisition of five product tankers of Navios Europe I in December coupled with an increase in market rates.

Adjusted EBITDA in the quarter was US$72.7 million, versus US$22 million in the prior year period, according to filings.

The US$670 million 8.125% notes traded at 70, as of 22 October, according to MarketAxess.

In Q2 2020, the company also took steps to address its balance sheet. In June, the company entered into a loan agreement with a commercial bank to refinance the outstanding balance on the existing facility of two product tankers. Navios also entered into sale leaseback agreements with unrelated third parties for US$72.1 million in order to refinance the outstanding balances of existing facilities of four product tankers.

During Q2, Navios Acquisition prepaid a total of US$76.3 million of its existing bank financings, filings show.

Subsequently in Q3, the borrower repurchased US$9 million of the ship mortgage notes for a cash consideration of US$5.3 million. In Q4 2019, Navios repurchased US$12 million of the ship mortgage notes for a cash consideration of US$10 million, SEC document shows.

Last Mile Holdings launches process to explore strategic alternatives and enhance value

Last Mile Holdings, a Vancouver, British Columbia-based provider of light electric vehicle rideshare programs, has hired a leading corporate and financial advisory firm to help it explore and evaluate several strategic options that further enhance shareholder value.

According to a press release, Last Mile's decision is in response to ongoing discussions with certain potential strategic partners who have expressed an interest in transacting with the company.

"The Last Mile and Gotcha Mobility businesses are undervalued assets, which collectively have the potential to realise material returns on investment through our existing growth strategy as well as additional strategic partnerships," said Last Mile CEO Max Smith in the press release.

Separately, Smith said that the company could consider expanding internationally via M&A. He did not rule out the company completing a deal before the end of the year.

OMERS explores US$2.5 billion sale of Kenan Advantage

OMERS Private Equity—the private equity business of Canada-based Ontario Municipal Employees Retirement System pension fund—is exploring selling Kenan Advantage Group for over US$2.5 billion, including debts, according to a newswire report.

OMERS has mandated an advisor to gauge interest of potential buyers, Bloomberg reported on 20 October citing sources close to the situation.

Kenan Advantage is an Ohio-based bulk transportation services provider and was acquired by OMERS in 2015.

Kenan taps Goldman Sachs, KeyBanc for potential sale, sources say

Kenan Advantage Group, the OMERS Private Equity-backed provider of tank truck transport services, has hired Goldman Sachs and KeyBanc Capital Markets to advise on a potential sale, said three sources familiar with the situation.

Earlier this week, various news outlets reported that OMERS could put the North Canton, Ohio-based company on the market and that it could fetch US$2.5 billion, including debt, in the event of a sale. The reports did not name the advisors.

Kenan generates EBITDA of around US$220 million, according to two of the sources, with an additional source familiar with the company saying its EBITDA is in the US$200 million range.

The company delivers fuels, chemicals, gases, food products and specialty products. Three of the sources noted that the bulk chemical and automotive fuel spaces were hit particularly hard during the pandemic, and, as such, Kenan may not sell for as high a multiple as OMERS is expecting.

The same sources said that the business sold for 9x EBITDA in 2015 and could fetch the same metric this time around. The burgeoning success of electric cars will greatly reduce demand for automotive fuel, which would hurt Kenan in the long run, one of the sources noted.

According to a recent Moody's report, Kenan's debt/EBITDA ratio is “likely trending towards the mid to high 6x range this year, before improving in 2021” as the economy gradually recovers from COVID-19. The article noted Kenan's exposure to “cyclical end markets” and said it is being hampered by “weak industrial and macro conditions”.

Kenan recently acquired bulk transport group Paul's Hauling and bought petroleum and chemicals transporter Les Distributions Carl Beaulac. Both were folded into Kenan's Canadian subsidiary RTL Westcan. Terms of both deals were undisclosed.

Goldman Sachs and KeyBanc both advised the sellers on OMERS' 2015 acquisition of Kenan from Goldman Sachs Capital Partners and Centerbridge Partners. They also underwrote the deal, providing US$1.025 billion of secured credit facilities, according to various reports. Harris Williams advised OMERS on the 2015 transaction.

Tiger Cool Express seeking advisors to explore strategic alternatives, sources say

Tiger Cool Express, a Overland Park, Kansas-based frozen cold storage logistics provider backed by Tiger Infrastructure Partners and Barings, is talking with investment bankers about potentially hiring one to explore strategic alternatives, said two sources familiar with the situation.

The process itself might be motivated by Tiger Infrastructure’s desire to monetize at a time when it is raising its third fund, said the sources. It is not clear if the sponsors are looking to exit the business or raise capital to expand its business model as it has done in the past. In 2017, Tiger Cool received US$15 million in equity financing from its sponsors. At that time, Tiger Cool had revenue of around US$100 million, according to news reports.

The company's EBITDA is in the US$15 million to US$20 million EBITDA range, said a third source familiar with the situation. Given its asset-heavy position, Tiger Cool is likely to fetch no higher than a low-single-digit EBITDA multiple, he added.

Tiger Cool is an operator of specialised refrigerated containers or reefers used in intermodal transportation. It launched in 2013 and, two years later, Baring—then known as Wood Creek Capital Management—came on board as an investor. The 2017 investment brought the company's fleet to 730 containers.

Georgia-based AmeriCold Logistics, part of listed REIT Americold Realty Trust, Arkansas-based JB Hunt, Illinois-based Hub Group and Wisconsin-based Schneider National could be attracted to Tiger Cool because of its intermodal freight focus, as could private equity firms, the third source added.

During COVID-19, intermodal groups like JB Hunt and Hub have invested heavily in expanding their refrigerated container and reefer fleets, as demand has grown for expedited temperature-controlled delivery. Companies that offer less expedited services have suffered.

In May, for instance, Union Pacific, shuttered its Cold Connect refrigerated service business, which transferred perishable food via rail from the West Coast to eastern New York. Delivery time typically took around a week and so the business could not compete with carriers offering faster service, according to the Journal of Commerce.

There has been significant cold storage consolidation during the pandemic, with AmeriCold acquiring temperature-controlled warehouse operator Agro Merchant Group for US$1.74 billion and Canada-based VersaCold Logistics also in the midst of a sale process.