SSW - Seaspan Corporation Tender offer

Seaspan Corporation (SSW) recently announced a tender offer for 10MM shares at $15 commencing in January 2012.  SSW is currently trading at $13.58, a discount of over 10%.  I have bought shares and have tendered the shares.  The main risk to this deal is that more then 10MM shares will be tendered (likely) and receive only a partial tender.

The main risk to a partial tender is that anyone pursing this short term deal may sell their extra shares (shares that were not tendered) on the open market pressuring the shares afterwards.

For example, investor A buys 100 shares at 13.58 for a total of $1358 + commissions.  Upon tendering, Investor A receives only a partial tender for 40 shares at $15.00 or $600.  The remaining shares he/she wants to sell afterwards.  Because there are thousands of "Investor A" out there, selling pressure causes the stock to trade at $12.00 or $780.  After all is said and done, "Investor A" may not have made any money (or lost money) with commissions.

Why would you buy this deal then?  Perhaps all of your shares are tendered, and you receive a full $1500 or 10% return on your money for one month.  Another option would be that most shares are tendered and/or the price of SSW does not fall too much.

The important thing to ask (for me) is if there was not a tender, where do you think SSW should trade at.  Is SSW undervalued?  Below is my thought process and analysis.

http://files.shareholder.com/downloads/SSW/1568182113x0x513681/f9f76f93-6b37-4ced-99d1-2e36509469ba/SSW_Q3_2011_FINAL_31_Oct_11.pdf

Here is a recent presentation from 10/31/2011. CapEx seems high for 2012 relative to ship value (4.4B vs 300MM) but is better in 2013/2014.  Another concern initially is that SSW was showing net losses.  This can easily be explained by their interest rate swaps and is not an issue.  The company has LIBOR debt and they are swapping for fixed rates.  Since interest rates are low, this shows up as a large loss that hits the company for negative earnings.  For 9 months, the company lost 105MM including the loss of 253MM on the interest rate swaps.  

The company has an enterprise value of 3.5B, net debt of 2.6B (415MM in cash) and 900MM in stock equity.  While debt is high, based on the presentation the debt is non-recourse to the company and secured by the ships themselves.  One thing that is not clear to me (looking at the 6K) is if the debt includes the preferred value or not. On valuation below, even if the preferred is not included (500MM) in the debt number the p/enterprise is not excessive.  I will also be able to get a better picture on the full annual report since SSW is registered abroad, reporting is done on a 6K vs a 10Q and is not as clear in the interim periods.  

Valuation (earnings excluding derivatives charge/preferred included?) There isn't a good way to calculate FCF with the growth in container ships/CapEx however if you look at earnings for 2010 the company would have a p/enterprise value of approximately 23 (3.5B/150M).  For 9 months, the company has already matched earnings with another quarter to go or closer to p/ev of 17.5 (3.5B/200M).  Since the company is increasing its operating days (days in quarter multiplied by # of ships) if you look at just the 3rd quarter and annualize that out the p/enterprise value is closer to 11 (3B/280MM).  If you just used equity instead of enterprise value, the p/e is approx 3.5 (900MM/280MM).