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Pure Play or Mixed Fleet?
Is it time to diversify to diminish risk? Mr. Fredriksen clearly thinks so or perhaps sees more opportunities with his companies being more closely aligned. Previously, Knightsbridge Tankers ordered two newbuilding Capesize bulkcarriers. This week they added a third acquiring the M/V Golden Future, delivered from Zhoushan Jinhaiwan Shipyard in February 2010, from the Golden Ocean Group, a related company, for a purchase price $72 million. The vessel is employed a 3-year time charter at a gross rate of $31,500 per day. The transaction is subject to the approval of Knightsbridge’s lenders.
This was an opportunity for Golden Ocean to diversify, which it did by taking partial payment in shares of Knightsbridge. Knightsbridge will pay $25 million of the purchase price by issuing to Golden Ocean 1,464,515 restricted common shares and will finance the balance through a senior secured credit facility, although it will evaluate other alternatives. The shares were priced at $17.07/share a 4.2% discount to the prior day’s closing price.
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Life on the Road
Following on the heels of a conference-filled week, public shipping company management eams such as those at StealthGas and TEN continued to develop their profiles and build their relationships with analysts and investors. Harry Vafias and Andrew Simmons of StealthGas opened the Nasdaq on Wednesday morning. Isabella Schidrich and her team at the Nasdaq celebrated StealthGas’ incredible growth story and presented Mr. Vafias with a special crystal for being the youngest CEO of a public shipping company in the world – and a successful company at that.
The Week in Review
The relatively quiet ship finance market over the past couple of months is beginning to show signs of life. The equity market this week picked up when K-Sea GP Holdings LP has filed for an IPO. Lehman Brothers and Citi are running the deal, which is set to raise up to $100 million. The company’s cash generating assets consist solely of partnership interests in US-listed K-Sea Transportation Partners, which currently operates a fleet of 73 tank barges, one tanker and 59 tugboats that serve a wide range of customers, including major oil companies, oil traders and refiners. We look forward to exploring this very interesting deal in more depth next week.
The Week in Review
While shipping stocks are no longer booming, the underlying shipping markets remain healthy. Jonathan Chappell and his team at JP Morgan are looking for near-record tanker rates at the end of 2007 to drive up 1Q08 EPS for tanker stocks and also believe that the tanker spot markets will hold up better than expected going forward. On the dry side, Urs Dür at Lazard sent out a note this week to correct common investor misunderstandings regarding the BDI, noting that it is not correlated to near-term world trade. He also expects Chinese iron ore price negotiations to be completed by March 2008, which combined with low inventories in China should lead to near-term improvements for dry bulk freight rates. Omar Nokta and his team at Dahlman Rose note that the tanker market could see some support as AG March cargoes come into the market this week while also observing that the dry bulk market has gained some positive momentum, though this has yet to be reflected in stock prices.
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