Diana Gifts its Shareholders

Also, just prior to Christmas, Diana Shipping announced its intention to partially spin-off its majority owned containership subsidiary, Diana Containership Inc., to its shareholders through a special dividend. Currently, Diana owns approximately 55% of the outstanding common shares and intends to distribute 80% of its interest or approximately 2.667 million shares. The shares will be distributed pro rata based upon the number of Diana Shipping’s shares outstanding. Based upon the share count outstanding at the time of the announcement, each shareholder would receive 0.0325 shares of Diana Containerships for each share of Diana Shipping owned. Following the distribution, Diana Shipping, its shareholders and the original third party investors will own respectively 11%, 44%, and 45% of Diana Containerships.

Written by: marinemoney | Categories: Freshly Minted, The Week in Review | January 6th, 2011 | Add a Comment

First Buy

Diana Containerships Inc, a majority-owned subsidiary of Diana Shipping, entered into agreements to acquire, from a third party seller, two 3,400 TEU newbuilding containerships constructed at TKMS Blohm + Voss Nordseewerke GmbH for EUR 37.3 million which equates to approximately $45.5 million. The first vessel is scheduled to be delivered on June 25th and will enter into a 9 to 12 month charter with A.P. Moller – Maersk at a gross rate of $16,000/day. The second vessel is scheduled to be delivered in the first half of July with no employment arranged as of yet.
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Written by: marinemoney | Categories: Freshly Minted, The Week in Review | June 24th, 2010 | Add a Comment

Missed Opportunity? Asset Play Loses Attraction?

There is a disadvantage associated with the public markets particularly in the case of raising capital for an SPV. While capital can be raised it does take time and more importantly you are forced to tip your hand, unless you do it with a SPAC or are a private company with cash.

In this case, two companies were vying for investors to acquire containerships at today’s depressed levels. Diana Shipping announced their intention to invest $50 million back in January for a minority stake in the venture with the balance being raised in a private offering to institutional and accredited investors. Then in February, the company noted that its $50 million investment was equivalent to a 38% interest in the new company. However, due to a change in the size of the offering announced this week, Diana’s $50 million investment now represents approximately 60% of the new company’s common shares, implying total available proceeds of approximately $83 million.
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Written by: carisk | Categories: Freshly Minted, The Week in Review | April 8th, 2010 | Add a Comment

Structuring Upside while Minimizing the Downside

Last week, Diana Shipping announced its intention to co-invest in a new company expected to invest in containerships over the next 12 to 18 months. Diana intends to invest $50 million for a minority stake, with the balance, as yet undisclosed, being raised in a private offering to institutional and accredited investors. Diana would further benefit from providing administrative and vessel management.
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Written by: carisk | Categories: Freshly Minted, The Week in Review | January 21st, 2010 | Add a Comment

Diana Finances

It pays to have a strong balance sheet. Last Friday, Diana Shipping announced that it had obtained a ten-year term loan for $40 million from Bremer Landesbank. Proceeds will be used to part finance the purchase of the M/V Houston, a 177,729 DWT Capesize bulkcarrier built in China. The vessel is chartered to Shagang Shipping Co., the guaranteed nominee of the Jiangsu Shagang Shipping Group Co. for approximately 60 months at a gross rate of $55,000 per day.
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Written by: carisk | Categories: Freshly Minted, The Week in Review | November 19th, 2009 | Add a Comment

Less Buzz, but…………More Business

On the outside, this year’s Jefferies Conference was subdued with less buzz than previously. However, it was a marked improvement to last year’s event, which coincided with the collapse of Lehman Brothers. Then the shipping markets were still good but all eyes were focused on the Bloomberg screens awaiting developments, while discussions revolved around whether or not to buy gold. Today was different. The economy seems to be improving while the shipping markets struggle. Shipping’s main source of capital, bank debt, is rationed while the equity markets are offering hope. Today was the day for public shipping companies to plead their case to investors. It was all about business.

We know that the presentations are the interlude and that the real action takes place behind the scenes during the one on one meetings as investors and companies engage in speed dating. Yet even in the public venue, we saw a clear dichotomy between the haves and have not’s. The rooms were packed for those companies with large market caps, liquidity and share volatility. For investors these days, slow and steady does not win the race. Nevertheless, the good news was that all the companies had meetings, although some had more than others. But all agreed the meetings were of high quality and now included a new class of investor – the opportunity fund.

As usual, our coverage will focus on points of interest to us. But as it was impossible to cover three tracks, our emphasis, for the most part, was on those unappreciated companies where interest may have waned, whether for lack of coverage or as a consequence of the market sector in which they participate.

Written by: carisk | Categories: Freshly Minted, The Week in Review | September 10th, 2009 | Add a Comment

Diana Also Taps the Equity Markets. But Why?

In a single day, Diana Shipping withdrew an old registration statement, filed a shelf registration and announced today a public offering of 6 million new common shares. The shares were priced of $16.85, a 9% discount to yesterday’s closing price of $18.52. Gross proceeds are in the order of $111 million. UBS Investment Bank will act as the sole underwriter. The transaction is expected to close on May 12th.

Written by: carisk | Categories: Freshly Minted, The Week in Review | May 7th, 2009 | Add a Comment

WKSI No More

Perhaps one of the least painful but aggravating aspects of the share price collapse of the shipping stocks is the loss of one’s “well-known seasoned issuer” or WKSI qualification. When the company’s market cap falls below $700 million, the company no longer is a universal filer but must register as you go. For perspective, as of Tuesday, only Teekay, Teekay LNG, Nordic American Tankers, Diana Shipping and Alexander & Baldwin were qualified. OSG just missed at $641 million.

Written by: carisk | Categories: Freshly Minted, The Week in Review | March 5th, 2009 | Add a Comment

Oceanaut Takes Out Its Checkbook

With little time and no specificity in its investment guidelines, other than it be in shipping, Oceanaut Inc., Excel Maritime’s sponsored SPAC, announced, on Monday, that it had found its deal and will follow the footsteps of its sponsor and invest in drybulk but with a difference. It is the intention of the parties that Oceanaut will serve as Excel’s exclusive long-term charter dry bulk vehicle focusing on charters of 4 to 10 years.

The company has entered into definitive agreements to purchase four drybulk vessels from Irika Shipping S.A. for a total consideration of $352 million. The acquired vessels, which aggregate approximately 279,000 DWT, include three Panamax vessels and one Supramax vessel, which are described above together with their prospective employment.

Written by: carisk | Categories: Freshly Minted, The Week in Review | August 28th, 2008 | Add a Comment

IPO Market Remains Robust For Shipping Issuers

Don’t be misled by the trade press articles and the fact that recent shipping issuers have priced IPOs at the low end of already lowered price ranges; the fact remains that based on our valuations of these companies, issuers are continuing to do U.S. capital markets deals at very attractive valuations. Moreover, we are seeing deals with single hull tankers (Capital), older vessels (TBS) and secondary share sales (Eagle), as well as related party management companies (various). Despite claims to the contrary, the fact remains that the American equity markets are wide open for all kinds of shipping deals. As we see dry cargo rates begin to bounce in recent days, we would not be at all surprised to see this sector regain momentum and enjoy another run.

As one of the 150 investors at Marine Money Week said over coffee, “just because we aren’t paying the retail price that investment banks put on the prospectus doesn’t mean that sellers aren’t getting a premium.” We would concur with that. The message being telegraphed back to the industry from Wall Street and Main Street investors is that the market is open for shipping IPOs even though the heady days of 2x net asset value are gone – at least until rates begin to gather momentum in the coming months.

That said, we should acknowledge the two companies currently engaged in roadshows in the U.S. Capital Maritime & Trading Corp filed an F-1 today for the issuance of 16.67 million shares at $14-$16 per share on the NYSE. We will discuss this deal further next week, when it is expected to price. Cosco has also traveled a long way to bring its roadshow to New York this week.

Eagle Bulk – Don’t Believe What You See

But deals still in the market do little to demonstrate investor appetite. Let’s take Eagle Bulk as our first in-depth example of why the U.S. equity markets are still open, and yes even attractive, to shipowners. The U.S.-based handymax owner Eagle cut the estimated price of its initial public offering to $14-$15 a share from the planned $16-$18 a share, but the company increased the size of the IPO to 14.4 million shares from 13.25 million to make up for the shortfall. The deal priced at $14 per share, which we estimate to be around 1.6x a net asset value that is already high, especially in light of declining charter rates. This is a phenomenal execution that gives start-up Eagle a better valuation than Teekay or OSG. As mentioned above, despite the fact that investors have supposedly rejected issuer’s attempts to sell secondary shares, private equity fund Kelso, which is the financial sponsor behind the Eagle deal, was able to extract about $70 million through fees and debt repayment, which represents almost the fund’s entire investment in Eagle, even while it still retained about half of the equity.

Soft Aftermarket Trading for Eagle

As we saw with Diana Shipping, Eagle has sagged in early aftermarket trading as the stock immediately sank to $13.50. As we understand it, Citigroup’s Smith Barney and UBS’s Paine Webber sold about 65% of the deal to retail investors while the joint bookrunners, which include the names above plus Bear Stearns, sold the balance of the deal to institutional investors. Although this type of sales technique resulted in solid pricing, as it did in the Diana deal, the aftermarket performance prevents “flippers” from immediately selling their stock for a gain. We do not know whether the underwriters exercised the green shoe or are willing to offer support by buying stock to stabilize the pricing. If they have already used their dry power to support the stock, however, we would not be surprised to see continued soft price performance, at least until we run into some sort of market upturn.

Are Dividends Losing Effectiveness?

One question we’ve been asked lately relates to yields. Specifically, how are investors looking at them? The answer, in our view anyway, is that yield can be used to increase valuation among certain fringe buyers of these stocks such as retail, but most experienced institutional investors clearly are looking at net asset value because issuers like Eagle do not have the long-term contracted cash flows required to meet the dividend in question over a sustained period.

In fact, investors that we spoke with at Marine Money Week seem to like growth stories and are discounting the real value of the dividend over the long-term. They are, however, looking at dividends as a way for them to lower their cost basis by receiving their deprecation and earnings in cash. As one Eagle investor said, “Do I think the 16% dividend is a guaranteed? No. But based on the company’s charters, I know I can get more than 30% of my money back over the first two years, meaning that I am really buying this company at closer to net asset value. That is the trade.”

This logic, although tempting, neglects to embrace the potential loss of principal that would result if rates and values return to historically normal levels. In our view, companies that seek to pay dividends and do not have long-term employment to back them up should just be careful to set them at realistic levels that do not stress the company’s liquidity and leave enough cash to take advantage of growth opportunities. It follows from this that Eagle priced at a quite respectable valuation, indicative more that investors have sobered a bit since January than that they have lost interest in dry cargo equity.