CQS RIG Finance Fund Limited
Commentary - August 2010
Equity and credit markets came under pressure again in August due to weak
economic data. Investors continued to remain concerned about a double-dip
recession and deflationary fears which resulted in the S&P 500 Index losing
around 4.7% during the month. Crude oil prices declined 9% to end the month at
approximately USD 72 per barrel.
The Company's estimated NAV per share closed up 6% at 26.46 pence against 25.03
pence at the end of July.
Gains were mainly attributable to two holdings in the portfolio after the
Remedial (Cyprus) PLC had previously exclusively appointed Clarkson Offshore to
manage the sale and auction process for substantially all of the assets owned by
Remedial and its subsidiaries. In August it was announced that it had agreed to
sell the Elevating Support Vessel under construction at Yantei Raffles to a
subsidiary of the shipyard. The consideration would be USD 55 million to be paid
in two instalments. On the basis of this purchase price and the release of the
Remedial's obligations under the Yantei Construction Contract, it is anticipated
that the transaction will have a value of approximately USD 90 million. The full
proposal can be seen at www.stamdata.no. The proposal was approved by the
bondholders on 3rd September 2010.
Rowan Companies, Inc. announced that it had priced a public offering of USD 400
million of its 5% senior notes due 2017 in a registered public offering. Rowan
expects the proceeds from the notes offering to be used for general corporate
purposes, including the potential repayment of indebtedness of Skeie Drilling &
Production ASA (SKDP). The specific mention of early repayment of the SKDP debt
caused the bonds to trade up further as investors analysed the call prices of
There was also a new issue in August from Floatel International. The 2nd lien
bond pays a 13% coupon and matures in 2015. Floatel has ordered two dynamic
positioning semi-submersible accommodation vessels from Keppel FELS Shipyard in
Singapore. The first vessel, "Floatel Superior", was delivered on 18th March
2010 and commenced first charter immediately on delivery. The second vessel,
"Floatel Reliance", is under construction and is scheduled for delivery late
2010. Further information can be found at www.floatel.se. The Company subscribed
for, and was allocated, an amount of the new issue.
All market data sourced from Bloomberg.
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Source: CQS Rig Finance Fund Ltd via Thomson Reuters ONE