Just in case there are actually people reading this board -
After the recent announcement of Gulfmark inking a deal to purchase Rigdon, I was a bit concerned about how the Jones Act issues with Rigdon/Bourbon would be dealt with.
I finally had a chance to dig into it further this weekend and the following articles sum it up.
Article #1 is a background item that was the best (bearish Rigdon/Bourbon) short summary of the issue that I found and Article #2 is an opposing view, stating that the financing offered by Bourbon was allowed in the rules. Article #3 is from the Bourbon website (english version) and states that Bourbon will sell its share to Gulfmark, issue resolved!
#1 Another assault on the Jones Act.
By Wells, Ken
Publication: Marine Log
Date: Wednesday, June 1 2005
When Congress passed the Jones Act in 1916, it meant to prohibit foreign control of vessels engaged in domestic trade "by any other means whatsoever." At the time, Congressman Saunders said, "We have sought to make the language so sweeping and comprehensive that no lawyer, however ingenious, would be able to work out any device under this section to keep the letter, while breaking the spirit of the law."
The jury is still out on whether lawyers have gotten more ingenious over the years, but the assaults on the Jones Act just keep on coming. A recent column in Marine Log (April 2005, p. 48) written by Constantine Papavizas purported to be an objective look at whether mortgages might be used to circumvent the Jones Act. Unfortunately, he failed to mention his involvement, working on behalf of a foreign shipping company that is using mortgages to establish a presence in the Jones Act trade. Nor did he mention his role in promoting the lease finance loophole in the Jones Act that Congress was forced to close last year.
In the interests of full disclosure, let me explain that the Offshore Marine Service Association (OMSA) has taken the lead in trying to stop the potential abuse of the Jones Act by Mr. Papavizas' client. Let's be clear from the start that this threat doesn't come from foreign banks or other financial institutions making conventional passive loans. It comes from foreign vessel owners who would use mortgages to buy market share in the U.S. Jones Act trade. By way of background, in 2002, France's Groupe Bourbon announced a major newbuild program to establish itself in a number of offshore oil and gas areas, including the Gulf of Mexico. Bourbon's intent couldn't have been clearer. According to its annual reports, "thus 2002 saw the strengthening of our offshore division, with growth operations in ... the United States" and "the underlying aim is to develop a corporate presence in the Gulf of Mexico."
To establish that corporate presence in the Jones Act trade, Bourbon signed a deal with Rigdon Marine to pay $12.5 million each for the construction of 10 U.S. flag vessels. Who was Rigdon Marine? A start-up company that had no track record and no vessels. In fact Rigdon only came into existence about a week before the deal with Group Bourbon was signed.
The deal was first pitched as a lease finance arrangement, but the Coast Guard was so suspicious of Bourbon's control of Rigdon that it delayed the coastwise endorsement on the first boat and later Congress outlawed that type of lease finance agreement altogether. By then Bourbon had already moved onto its next scheme, a $128 million mortgage to Rigdon (or more than the cost of constructing the vessels.) In the experience of OMSA's members, that kind of "no money down" deal is unheard of in the offshore sector and OMSA has been pushing for a thorough investigation for more than a year.
So where are we today? Despite a unified concern from the offshore sector, eight of the 10 Rigdon OSVs are now in service, all bearing the distinctive Groupe Bourbon green hull colors. And as for control, the mortgage deal makes it clear that as a practical matter, Rigdon can't sell the boats or even refinance without Bourbon's permission. Nor can Rigdon take its boats anywhere that they would compete directly with Bourbon without Bourbon's permission. How much more evidence of control is necessary?
More than anything we are concerned about the implications for the Jones Act. The Coast Guard says its powers to investigate are limited and that it could do little more than scratch beneath the surface of the deal. For example, the Coast Guard lacks the authority to seek information from the mortgagee that would allow it to unmask impermissible non-citizen control of vessels engaged in the U.S. Coastwise trade.
That is the real problem here. If the Bourbon approach allows a foreign vessel owner to "develop a corporate presence" in the Jones Act trade without any acceptable level of scrutiny by the U.S. government, the next deal can't be far behind, followed by the next deal and the next and the next. That is how loopholes are born.
By Ken Wells, President, Offshore Marine Service Association (OMSA)
#2 also from Marine Log date unknown (probably mid 2002)
A SPLASH OF BOURBON IN THE GULF
Larry Rigdon sure knows how to make the most out of “retirement.” The former Tidewater executive vice president created a stir in late November when his newly formed company, Rigdon Marine LLC, New Orleans, La., announced it would use $125 million in financing from France’s Groupe Bourbon to build ten deepwater DP2 Platform Supply Vessels (PSVs) at Bender Shipbuilding & Repair Co., Inc., Mobile, Ala.
So why would Rigdon, a 28-year veteran of the offshore energy business, want to go up against the likes of Tidewater, Edison Chouest, and Seabulk International? “
I was bored and I wasn’t really ready to retire,” says Rigdon (laughing). “Really, I’ve always had a long term desire to own my business. So when I did not get the top job [at Tidewater], I saw it as an opportunity.”
Continues Rigdon, “One question I had to ask was, ‘How do I differentiate the company from existing players. I had to use the technological advantage. I saw a market niche that I could fill, if I was willing to take a technology risk. That’s the huge advantage of being a small company. We think we can be more flexible than a large company.” Adds Rigdon, “If you had to look at someone whose done this really well, it’s Edison Chouest. They took a technology risk. And it’s paid off.”
The PSVs were designed in conjunction with naval architectural and marine engineering firm Guido Perla & Associates, Inc., Seattle.
One of the technological edges incorporated in the 210 ft PSVs ordered by Rigdon Marine is their diesel-electric propulsion plants. “That’s unusual for a vessel this size,” says Rigdon. “But Otto Candies showed me the way with that. Diesel-electric propulsion will improve the environmental and economic performance of these vessels. Adds Rigdon, “Ordinarily, offshore service vessels of this size go about 10 knots at full load; with this design we can go 13 knots; a 30% gain in efficiency.”
The vessels’ electric motors will drive the 360 degree azimuthing thrusters. One rumor had it that the PSVs would be fitted with azipods.
“Azipods are excellent technology, but too expensive—at least right now—for vessels this size. They’re are better suited for use in 280 footers,” says Rigdon.
Each PSV will be equipped with a DP2 level dynamic positioning capability for superior station keeping. DP2 is the latest generation of dynamic positioning technology, the most advanced equipment available, and its operational capability will be certified by the American Bureau of Shipping. All the vessels will be U.S. flag.
The Coast Guard will allow the use of a dynamic positioning (DP) system on an OSV for the purpose of “mooring” the vessel during oil and hazardous material (HAZMAT) transfers to and from an offshore facility or rig, in water depths that exceed 300 feet where compliance with the mooring requirements of 33 CFR 156.120(a) became difficult and/or expensive.
In shallower waters vessels must fully comply with 33 CFR 156.120(a) using a suitable anchoring/mooring system.
Rigdon plans to have Rigdon Marine certified under the strict, high standards of ISO 9000 and ISO 14000, substantially exceeding the minimum ISM (International Safety Management Code) standards.
According to Rigdon, Bender has already developed a build strategy and a complete 3D CAD model should be ready for a “complete walkthrough” in April 2003. Once approved, it will take Bender between 9 to 10 months to build the first vessel.
Deliveries are scheduled to begin in the first quarter of 2004, continuing until the third quarter of 2005.
These vessels were designed to satisfy the needs of the growing worldwide deepwater offshore markets, with current focus on West Africa, Brazil and the Gulf of Mexico. They will also serve to rejuvenate the Gulf of Mexico classical service/supply vessel fleet, much of which exceeds 20 years in age.
MUCH ADO ABOUT BOURBON
Rigdon sought and obtained interim financing from France’s Groupe Bourbon for the venture. Groupe Bourbon concentrates in two business sectors: retail distribution and maritime services with a fleet of over 200 vessels operating in harbor towage, dry bulk transport and offshore oilfield services.
The agreement between Rigdon and Groupe Bourbon provides for the operation and employment of the vessels in the U.S. market by Rigdon Marine. The offshore division of Groupe Bourbon will assist Rigdon Marine with the marketing of the vessels internationally.
This development will provide a major step forward for Groupe Bourbon’s strategic growth in the deepwater offshore marine service sector.
When it was announced, the Rigdon Marine-Groupe Bourbon deal raised a hullabaloo among Jones Act proponents. But shipbuilding consultant Tim Colton doesn’t see what all the fuss is about.
On Colton’s website, www.coltoncompany.com, Colton says, “The American Waterways Operators and a few other folks are getting all worked up about the use of foreign sources of lease financing for Jones Act ships. This is allowed under a change in the regulations that was introduced in [the Coast Guard Authorization Act of 1996] and is being used now, for example, by Rigdon Offshore to obtain financing from Groupe Bourbon for the construction of a 10-vessel fleet of PSVs.
“Proponents say that this is a healthy change, introducing much needed new sources of capital into the industry, without any down side, and gives overseas investors an interest in preserving the Jones Act. Opponents say that the revised language was snuck into the law in the middle of the night without any discussion, is contrary to all the principles of the Jones Act and presents a serious threat to the national security.
“I say that money is money and the more of it our industry can lay its hands on, the better (me included of course).” Says Colton, “I suspect that the Jones Act operators who object to this financing mechanism are: (a) jealous and (b) afraid of the competition.”
#3
Paris, May 29, 2008, pdf version
Under the merger proposal between Rigdon Marine Corporation and Gulfmark Offshore announced on May 28, BOURBON is to sell its interest in the Rigdon companies.
This sale will be effective on completion of the merger which is due to take place in the 3rd quarter of 2008.
For BOURBON it will generate:
capital gain on sale of approximately 60 million euros,
repayment by Rigdon of loans granted by BOURBON, for a total of 110 million euros, which, in addition to the cash proceeds from the sale, will reduce the group’s debt.
Since January 2006, BOURBON had contributed to the implementation of Rigdon’s financial structure.
As this company has been so far accounted for according to the equity method, the sale will have no impact on revenues nor on BOURBON’s EBITDA.
