Saturday, November 08, 2008
Economou allays fears as DryShips seeks cash
Nigel Lowry, Athens - Friday 7 November 2008
DRYSHIPS boss George Economou has confirmed that his Nasdaq-listed company is in good health after a warning-laden share prospectus filing spooked the market, already jittery from the dry bulk crash.
Shares in the Athens-based bulker owner plunged by about 20% in a generally rough day for US listed dry bulk shipping stocks on Thursday, following a move by DryShips to register up to 25m new shares in a prospectus filed with the Securities and Exchange Commission.
Among risk factors mentioned in Thursday’s filing, DryShips said that even with a hefty injection of fresh equity from sale of the new shares it “cannot be assured” that company operating and capital needs would be satisfied, or that it would remain in compliance with debt covenants “if the current low charter rates in the dry bulk market continue”.
Conjuring up a possible doomsday scenario, the company noted: “If we are not able to comply with our loan covenants and our lenders chose to accelerate our indebtedness and foreclose their liens, we could be required to sell vessels in our fleet and our ability to continue to conduct our business would be impaired.”
However, Mr Economou told Lloyd’s List a day later that the grim tone that arguably could be discerned in the filing was a normal one for prospectuses.
“The underwriters put in a lot of risk factors to safeguard our back against litigation,” he said.
“We are not breaching any covenants and we are not at risk of breaching covenants. Nor are we planning on breaching them.”
He said an analyst who downgraded the company’s stock had over-reacted.
DryShips, which controls a 58-strong bulk fleet including 15 newbuildings, had three days earlier reported third quarter net income of $180m and Mr Economou had dwelled on the company’s “strong financial condition”.
It already had cash of $456m and another $1.2bn in committed bank lines, adding up to nearly $1.7bn in total liquidity.
Discussing the potential sale of 25m shares from time to time through Cantor Fitzgerald, Mr Economou said: “I want to have cash to use it as a cushion or as firepower.”
Mr Economou said that “no-one can tell for sure how long a bad market may last”.
He added: “Personally I do not think it will be particularly bad for a very long time and I suspect China will probably start moving, but we also want to be prepared for adverse market conditions.”
DryShips shareholders — Mr Economou foremost among them — face significant dilution if large tranches of the possible 25m new registered shares are sold.
If all the shares covered by the prospectus are eventually sold it would more than double the current amount of outstanding stock. There are already 19m shares to be issued to repay the sellers, chiefly Mr Economou, of nine capesizes DryShips recently agreed to take over.
Following completion of the big capesize deal, the chief executive’s personal stake in the company is estimated to rise to about 35%.
As adapted from Lloyds List
0 comments:
Post a Comment