NNA/NNA+ warrant play info from Yahoo thread from Fernando....
1)Warrant strike is $7 and expires June 2013. Currently trading at $1.
2)Common liquidation price is $9.91.
3)SPAC deal can close with 39.99% IPO shareholders choosing to liquidate.
4)NM&CEO willing to buy up to 25% ($60M) of IPO-Shares in open market/transactions (and would vote yes with those shares). This raises liquidation possibility to 65%. There is some more cash lying around so make it 70% max of IPO shareholders choosing to sell/liquidate. Good margin of safety. Two IPO shareholders owning roughly 15% of the common also own alot of warrants making them want the acquisition to go through. They say they may spend more than 60M if needed, this acquisition WILL go through (highly highly likely).
5)If NM&CEO do not spend at least $30M in the above, they will invest $30 in NNA at $9.91 per share upon consumation (raises book value).
6)Book value after the deal will vary from roughly $6.7 to $7.8 depending on how many people liquidate (6.7 if all 39.99% choose to do so, of course that means really 65% chose it since first 25% liquidation do not impact book value since NM&CEO will buy it). Based upon this I believe it likely that the book value will be over $7.
7)SPAC is buying product/chemical tankers...Great time to buy it, price has dropped 40%+ from 2008 peaks, at historic lows and equal to prices before 2005. I expect price increases in the next 2-3 years raising book value significantly.
8)73% debt, 27% cash payment for ships...4x leverage for good exposure. Very good terms on financing.
9)Only TWO ships are currently built. Another two would be finished in late 2010, the rest in late 2011 and 2012. Thus the business would not generate significant cashflow initially. Good long term-play certaily (Beyond the possibility of short-term gain from warrant price increases).
10) Warrants have a redemption feature (like CCME did). If the common trades above $13.25 for 20-out-of-30-trading-days they can force us to exercise by sending a redemption notice.
11) Acquisition vote to happen in NYC in May 2010.
With the warrants trading at $1, we are paying a bit (10%) above book for entry into the company. Given the extremely attractive ship purchase-prices achieved given historical norms, time premium associated with the warrants (mid 2013 expiration) and industry dynamics (buying at historical trough -- Current charter rates barely allow break-even for operators)...This seems like a good long-term play at this current warrant price. I believe there is also a decent chance the warrants go higher upon the acquisition being approved in two months.
I am not worried about buying into the common via warrants at a price 10-15% above book value because of the 4x leverage (73% financed, 27% cash). If ship prices go up a measly 3% from the fantastic purchase-price, i'd be at book value. Keep in mind ship prices would have to go up 55%+ to get back to the 2008 heights, so a 10-15% price recovery in the next 2 years is very likely. This would put the book value above $10-11 and give very nice returns for the warrants for a long-term investor.
-Fernando
