UPDATE 3-Diamond S Shipping gets $1 bln investment

Mon Aug 1, 2011 11:35am EDT

* Ross, First Reserve, CIC, Fairfax commit to invest

* Diamond to buy 30 product carriers from Cido Tanker (Adds details, analyst quote in paragraphs 5,6)

By Krishna Das and Jonathan Saul

BANGALORE/LONDON, Aug 1 (Reuters) - Diamond S Shipping said WL Ross, First Reserve and some other global institutional investors had committed about $1 billion in equity to the privately held U.S. shipping group as it looks to expand its fleet amid rising demand for oil.

Diamond will buy 30 medium-range refined product carriers from privately owned Cido Tanker Holding Co under a deal expected to close in this calendar quarter. This will add to its fleet of 10 tankers under construction in Korean shipyards.

To ensure a smooth transaction of existing charters, third-party management contracts, flags and classifications of the ships, the Cido deal was structured as the purchase of stock in companies that own the 30 product carriers.

Diamond CEO Craig Stevenson Jr told Reuters it was "very attractive to buy assets" as the shipping industry grapples with vessel oversupply issue.

Diamond was founded in 2007 by private investment firm First Reserve and Stevenson to create an energy-focused shipping company. Prior to that, Stevenson led OMI Corp that is now owned by Teekay Corp and Torm A/S .

"This deal is significant and is quite a significant step for both Diamond S and First Reserve and is one of the largest deals in maritime history within the product carrier segment," Dahlman Rose & Co analyst Omar Nokta said.

Apart from First Reserve and Ross, the other equity investors in Diamond are China Investment Corp , Fairfax Financial Holdings Ltd , Morgan Creek Capital Management and PPM America Capital Partners.

"We have been looking for the right opportunity in the shipping industry for some time," said Wilbur Ross Jr., Chairman of WL Ross & Co.

Replying to a question whether the investments were a prelude to Diamond going public, Stevenson said: "When you add all the ships together, the 40 ships, it's identical to the public company that I was in... so it would resonate with the public market." (Reporting by Krishna N Das in Bangalore and Jonathan Saul in London; Editing by David Cowell and Gopakumar Warrier)

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