What will be the size of the largest containerships ordered by the end of this year?

10,000 TEU
12,000 TEU
15,000 TEU

August 7, 2005

Seaspan IPO set to raise $604 million

Want to own a piece of some of the largest containerships afloat or under construction? Initial public offerings expected the week commencing August 8, 2005 include Seaspan Corporation.

Seaspan Corporation is a newly incorporated Marshall Islands corporation formed to acquire all of the containership business of the Washington Group's Seaspan Container Lines Limited.

Assuming the stock prices at the midpoint of the reported price range of $20-$22, the company will have an initial market capitalization of $604 million

The initial public offering will include 28,570,000 Common Shares. The offering will increase to approximately 32,855,500 Common Shares if the underwriters exercise in full their over-allotment option.

According to an SEC filing, concurrently with this offering, the corporation is selling 7,145,000 subordinated shares to members of the Washington family, or trusts set up on their behalf, to an entity owned by chief executive officer, Gerry Wang, and to an entity owned by Graham Porter, a director of the company's manager, at a per share price equal to the initial public offering price.

According to the filing, on completion of this offering, Seaspan will acquire ten containerships consisting of eight 4250 TEU vessels and two 8500 TEU vessels.

"We refer to these ten containerships as our initial fleet," says the filing. "In addition, we have entered into a purchase agreement ... to acquire an additional 13 new containerships as they are completed and delivered, over approximately the next 25 months. The additional 13 containerships will consist of eleven 4250 TEU vessels and two 9600 TEU vessels. We refer to these 23 vessels collectively as our contracted fleet. Our contracted fleet will have approximately 116,900 TEU in total capacity. In order to complete the acquisition of the additional 13 containerships, we expect to borrow $663.0 million under our credit facility and to raise net proceeds of $156.8 million from the sale of additional common shares in the first quarter of 2007."

The filing also says "our operations will be managed by our Manager, Seaspan Management Services Limited, under the supervision of our board of directors. We have entered into a long-term management agreement pursuant to which our Manager and its affiliates will provide us with technical, administrative and strategic services. Our Manager is owned, directly or indirectly, by trusts established for members of the Dennis Washington family and an entity owned by directors and officers of our Manager and SCLL. SCLL is primarily owned by an entity controlled by a director of SCLL and an entity that is a member of the Washington Marine Group."

"Our initial fleet," says the filing, "is currently under time charters with China Shipping (Group) Company, or China Shipping, which has subchartered them to China Shipping Container Lines Company, Limited (CSCL). CSCL is a majority-owned subsidiary of China Shipping. These charters have an average remaining initial term of 9.1 years. ... The additional 13 vessels under construction are also subject to long-term, fixed-rate charters. Four of these vessels are chartered to China Shipping under charters with terms of 12 years. Nine of the additional 13 vessels are under time charters with a subsidiary of CP Ships Limited, or CP Ships, for initial terms of three years that automatically extend for up to an additional seven years in successive one-year extensions, unless CP Ships elects to terminate the charters with two years prior written notice. Given that the subsidiary of CP Ships is required to pay a substantial fee to terminate a charter at the end of the initial term, that our charter hire rates are presently substantially below those rates offered in the spot market or short-term market, and that the charters automatically renew unless terminated upon two yearsŐ prior notice, we believe it is likely that the subsidiary of CP Ships will extend the charters beyond the initial terms."


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