US-listed shipping companies are increasingly shifting to sales of perpetual preferred shares as opposed to common equity, with yet another preferred deal just announced.
On 6 May, container-ship lessor Costamare priced the sale of four million perpetual preferred shares at a dividend rate of 8.75%. Gross proceeds will be USD100 million or USD115 million if underwriters fully exercise overallotment options.
Costamare’s newly offered preferred shares will be separately listed on the New York Stock Exchange. It is the company’s third offering of perpetual preferred equity, following previous sales in July 2013 and January 2014.
Net proceeds of the latest offering may be used for vessel acquisitions, including those under its joint venture agreement with York Capital.
Three shipping offerings of perpetual preferred shares closed last month: Tsakos Energy Navigation (USD85 million in gross proceeds at an 8.75% dividend rate), Teekay Offshore (USD125 million in gross proceeds at an 8.5% dividend rate), and GasLog (USD115 million in gross proceeds at 8.75% dividend rate).
With aggregate gross proceeds of USD425 million through early May, the shipping sector is on a record annualised pace. Shipping gross proceeds from perpetual preferred offerings totalled USD701 million in 2014, USD468 million in 2013, USD78 million in 2012, and USD359 million in 2011, when the sector first entered this market.
The sale of perpetual preferred equity allows public companies to raise funding without diluting common shareholders. Perpetual preferred equity is a hybrid security that has debt-like attributes – such as fixed dividend payments akin to the interest or ‘coupon’ rate on a bond – but is not considered debt for accounting purposes.