Hard Numbers

Moving from the theoretical to the concrete, the following examples illustrate the real cost of today’s crises:

Genco Bites the Bullet
On Tuesday, Genco Shipping & Trading (“Genco”) made the correct but painful decision to cancel the previously announced acquisition of six dry bulk newbuildings, including three Capesize and three handysize vessels, from Lambert Navigation et.al., at an aggregate purchase price of $530 million. As part of the agreement, the sellers will retain the deposits totaling $53 million. The three Capesize vessels and three Handysize vessels are being constructed in the Daehan and Jinse shipyards in South Korea, with deliveries commencing in the 4th quarter 2008 (two Handysize) through 2009.

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Bank of America Has High Hopes for DWT

Bank of America’s new analytical team, Michael Pak and James Lee, published this week an initiation report on Britannia Bulk that sheds some light on the company’s business model and market exposure. The company, which went public on the NYSE with an IPO this past May, is a global dry bulk-shipping provider with a leading position in ice-class trade, particularly in the Baltic region. They currently own 28 vessels (22 of which are in the water) and charter in 35-70 vessels in order to capture profitable business that cannot be serviced by its existing fleet. The company began in 2004 and forecasts 42% EBITDA growth over the next two years.

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Welcome Back!

Last night our inbox rapidly filled with an onslaught of research from Banc of America Securities’ Michael Pak and James Lee, who initiated the bank’s coverage of the dry bulk shipping sector. In a report entitled “BofA Dockings: Stock Ideas Against a Strong Current,” Messrs Pak and Lee provide a guide for investors to navigate through the sector over the next 12 months and a primer for first time investors in the sector.

They have initiated their coverage of the sector with an overweight rating based upon a favorable risk/reward profile resulting from the recent pullback on near term concerns related to seaborne trade and heightened volatility of freight rates.
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