Poor Uncle Needs Cash. What’s a Good Nephew to Do?

Our thanks to Oppenheimer’s Scott Burk for highlighting OceanFreight’s plan to issue up to $147.9 million of common shares as part of an Standby Equity Purchase Agreement with YA Global Master SPV (“YA Global”) arranged by DVB Capital Markets.

The transaction would be extremely dilutive to shareholders. If all $147.9 million of shares were sold at $3.83, the last reported price prior to the announcement, the company would have approximately 57.2 million shares outstanding which represents an increase of 208% in issued and outstanding shares.
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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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A Bargain?

The following sales of dry bulk vessels were reported last week in Cleaves Shipbroking’s S&P Market Report:

“ARETHOUSA DWT 171,779, BLT 9/1999 AT HYUNDAI HEAVY ULSAN, SOUTH KOREA, M/E B&W HYUNDAI HEAVY SOLD FOR USD 90 MILL (AFTER BEING RENEGOTIATED FROM USD 133 MILL).

PILION DWT 48,218, BLT 9/1994 AT SHENAVEH, DENMARK, 4 X 25T CRANES, M/E B&W MITSUI TAMANO, B&W SOLD FOR USD 33 MILL (AFTER BEING RENEGOTIATED FROM USD 51.5 MILL).

OCEAN GLOBE DWT 43,246, BLT 8/1995 AT HYUNDAI HEAVY ULSAN, SOUTH KOREA, 4 X 25T CRANES, M/E B&W HYUNDAI HEAVY SOLD FOR USD37 MILL (AFTER BEING RENEGOTIATED FROM USD 53 MILL).”
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A True Believer Consolidates and Does Right by His Shareholders

On Monday, George Economou announced a major strategic expansion by DryShips Inc. (“DryShips”) in both its bulk and offshore businesses. First, the company acquired the equity interests, from entities controlled by Cardiff Marine Inc., in nine Capesize bulkcarriers, including five newbuildings for $690 million payable in the form of 19.4 million newly issued shares ($35.50 per share) of Dryships common stock increasing the number of shares to 63 million. In addition, the company will assume $216.3 million of existing debt and $262 in remaining shipyard installments. The latter will be funded by debt facilities in place except for $16 million that will be funded by cash flow. The implied aggregate value of the purchase is estimated at approximately $1.2 billion or approximately $130 million per vessel.

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Hail Britannia!

On Wednesday shares of Britannia Bulk were fully sold at $15, below the $17 to $19 expected range. Given the volatility of the recent week in the dry bulk markets, we believe this to be a huge success and congratulate the company and its bankers, Goldman Sachs, Banc of America, Dahlman Rose and Oppenheimer on a deal well done.

Asset-Light Niche Player Times the Market

Following quickly on the heels on a multitude of successful follow-on offerings and the Safe Bulker IPO, Britannia Bulk Holdings, Inc. has decided to test the waters here in New York with its IPO. Led by Goldman Sachs and Banc of America Securities together with the support of Dahlman Rose and Oppenheimer, the company is selling 8,333,333 shares at a price range of $17 to $19 and is seeking a listing on the NYSE. The proceeds of this primary offering will be used to de-leverage the balance sheet giving the company access to additional capital resources to grow the company. Management will retain an approximate 70% interest in the company. The terms of the offering are summarized in the Guts of the Deal table contained herein.

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