WL Ross & Co. joined a consortium of investors that has agreed to help Diamond S Shipping buy 30 vessels that carry refined oil to add to its fleet of 10 tankers under construction in Korean shipyards from Cido Tanker Holding Co. The energy industry-focused firm First Reserve Corp., Diamond S Shipping’s founding investor, is leading the investing group that also includes China’s sovereign wealth fund, China Investment Corp.
The firms are committing a total of about $900 million of equity, of which WL Ross is committing “a little over a third,” or $300 million, Ross told Buyouts. Nordea Bank Finland and Norway’s DnB Nor Bank are providing $1.1 billion in debt financing, Ross said.
Ross said his firm had been looking at shipping opportunities for a few years now, drawn to a dislocation between rising demand for oil and a shortage of vessels.
“This industry has a history of going from shortage to over-supply and it keeps vacillating between the two,” Ross said. When asked if he’s hoping to get in at the beginning of that cycle, he added, “That’s our hope.”
Ross said he also likes the recurring revenue aspects of the business, with oil and gas companies often signing shipping contracts lasting several years.
WL Ross is also looking at deals in other shipping-related areas, Ross said.
“We could go…into other segments, such as containers or bulk carriers” that carry iron ore, grain, and other products, he said.
Other big-name buyout firms have also been drawn to shipping in recent months.
In March, The Carlyle Group announced a joint venture with Tiger Group Investments and Seaspan Corp. to buy more than $5 billion of shipping vessels to capitalize on increased demand in the sector. The firm is currently looking at several opportunities and expects one to come to fruition soon, a source close to Carlyle told Buyouts.
And Leon Black told attendees of a recent conference that shipping is of major interest to his firm, Apollo Global Management, which bought a fleet of super tankers and contracted them out to oil companies, according to trade pub PE Manager.
WL Ross will make the investment out of its fourth fund, which raised $4.1 billion in 2007. The firm is currently raising its fifth fund, and is reportedly planning on raising a similar amount. Ross declined to comment on the fundraising, other than to say he expects it to take another several months.
Ross, who cut his teeth in restructurings during a 24-year career with Rothschild Inc., has found success in other complex and often struggling industries such as American steel and Japanese banks. Most recently, he joined Canada’s Fairfax Financial (which is also participating in the Diamond S Shipping deal) and California’s The Capital Group to invest $1.6 billion in the Bank of Ireland.
Executives at First Reserve Corp. were not immediately available for comment.
Bernard Vaughan is a Senior Editor at Buyouts Magazine. Follow his tweets @BVaughanReuters.