Thursday, March 05, 2009
Counterparty risk continue to weigh on shipping stocks
Thursday, 05 March 2009
Investor fear of charter couterparty risk and weakness in freight rates may continue to weigh on the dry bulk shipping stocks in the near term. A counterparty risk arises when a charterer, who has hired a vessel from a shipping company, may not be able to pay the agreed freight rates. Ever since Greek dry bulk carrier Excel Maritime Carriers Ltd announced on Feb. 17 that it cannot assure its charterers may pay the agreed rates, the dry bulk stocks have witnessed sharp declines.
Since Feb. 17, the broader Dahlman Rose Dry bulk Shipping Index, which consists of 12 U.S.-listed dry bulk shipping companies, have fallen about 33 percent.
In contrast, the benchmark Baltic Dry bulk Index, which measures spot freight rates have risen about 6.3 percent. Normally, the dry bulk shipping stocks move in tandem with Baltic dry bulk index.
Jefferies & Co analyst Douglas Mavrinac said that since Excel's announcement, people became fearful of more counterparty charter defaults. But he added that there was no widespread charter defaults.
Oppenheimer analyst Scott Burk said charter counterparty risk is partly responsible for hurting dry bulk stocks.
Investors are still looking for exits, despite assurances from Diana Shipping Inc and Genco Shipping & Trading Inc that they were not facing any counterparty risk.
WEAK FREIGHT RATES
The second quarter 2009 forward freight rate for Capesize vessels have fallen 30 percent since Feb. 17 to about $23,500.
A tropical storm lashed Australia's northwestern coast last week, which forced iron ore miners like BHP Billiton Ltd/Plc and Rio Tinto to temporarily restrict some operations in the key Pilbara region. This further hurt the freight rates.
"The dry bulk rates have come down a little bit. The Capesize rates have fallen because of disruption in iron ore loading in Australia," Jefferies & Co analyst Douglas Mavrinac said.
Mavrinac said the storm disrupted iron ore shipment even though the demand for it is still robust.
Moreover, the commencement of iron ore shipment should help the freight rates.
"There are reports that iron ore loadings operations are beginning again in Australia after rains and floods suspended operations in the Pilbara region," Dahlman Rose analyst Omar Nokta said in a research note.
"Rio Tinto had mentioned that it intends to restart its operations by the end of last week which could lead to a more active market," Nokta said. Weaknesses in Chinese iron and steel prices and broader market may also continue to weigh on the dry bulk stocks.
Chinese spot steel prices fell 5.3 percent in a third consecutive weekly fall, on rising inventory after a much-anticipated demand recovery failed to materialise.
"Over the last three weeks the forward rates have come down, also seeing weakness in iron ore and steel prices, which potentially implies weaker rates in the future," Oppenheimer's Burk said.
Source: Reuters
Wednesday, February 18, 2009
Euroseas Ltd. Announces Acquisition of a Panamax Vessel and Sale of Handysize Vessel
Wednesday, 18 February 2009
Euroseas Ltd., an owner and operator of drybulk carriers and container vessels and provider of seaborne transportation for dry bulk and containerized cargoes, made today several announcements as follows: Fleet Expansion and Renewal: Euroseas announced today, that it signed a memorandum of agreement to acquire charter free the M/V Glorious Wind, a Panamax drybulk carrier of 72,119 dwt built in 1997 in Japan, for approximately $18.4 million. The vessel is expected to be delivered to the Company within the first week of March 2009.
Furthermore, the Company announced that it sold and delivered to her new owners the M/V Nikolaos P, a 34,780 dwt 1984 built Handysize drybulk carrier, one of the smallest and oldest vessels in the Company's fleet, for $2.4 million.
Dividend Declaration for the Fourth Quarter 2008:
The Company's Board of Directors has declared a dividend of $0.10 per common share for the fourth quarter of 2008. The dividend is payable on March 20, 2009 to all shareholders of record as of March 12, 2009. This is the 14th consecutive quarterly dividend since the company accessed the capital markets in August 2005.
Aristides Pittas, Chairman and CEO of Euroseas, commented: "Taking advantage of the current market conditions, we are pleased to continue our fleet renewal and expansion program by announcing the purchase of a 1997 built Panamax bulker with the simultaneous sale of our oldest bulker built in 1984. The total capital expenditure for these two transactions will be $16 million as compared to about $50 million if we did the same transactions only five months ago.
"In this market we have to be particularly prudent and alert so that we can maximize the benefit for our shareholders for the long term. While we have to deal with a challenging market environment, we believe that there will be unique investment opportunities in the near and medium term. We are confident that our strong balance sheet and our cost effective operations will enable us to renew and expand our fleet at opportune times properly positioning our company to benefit from an eventual market turnaround.
"In this context, our Board declared a quarterly dividend of $0.10 per share which represents a yield of about 8.6% on our current stock price. The declaration of the dividend signifies our ability and intention to continue paying healthy dividends alongside our fleet renewal and expansion program."
Source: Euroseas Ltd.
Wednesday, February 11, 2009
Can DryShips weather credit storm, sail smoothly?
Wednesday, 11 February 2009
Almost two years, Greek shipping company DryShips Inc. was the darling of the dry bulk sector, with its share price and earnings consistently outperforming those of its peers. But all that changed with the global credit crisis and an ill-timed fleet expansion. DryShips, which had borrowed about $3 billion in the last two years to fund an ambitious fleet growth strategy, was caught in the whirlpool of the credit crunch, forcing it to cut capital spending and suspend its dividend to save cash.
In January, the company said it might be in breach of certain loan covenants, and it has since been negotiating with bankers to restructure its debt.
To date, it has obtained covenant waivers for roughly $1 billion.
The company's share price bears testimony to the sinking fortunes of the dry bulk industry. Its shares have plummeted about 90 percent over the last year, mirroring the Baltic Dry bulk index (BDI), which has also lost roughly the same percentage of its value.
DryShips was once the largest U.S.-listed shipping company with a market capitalization of about $5 billion. At the height of the bull run in the shipping sector, its shares touched a lifetime high of $131.07.
In contrast, the shares closed at $6.50 Monday on Nasdaq, with market capitalization of about $389 million.
Of the 13 analysts covering the stock, eight have a "sell" rating, and two analysts each have "buy" and "hold" ratings, according to Reuters data.
BUY ON SECTOR FUNDAMENTALS
"We have a 'buy' on the sector and we think things are improving -- BDI is up 14 days in a row. We are positive on the dry bulk shipping sector and, as a participant in the sector, DryShips would have an upward earnings bias," analyst Douglas Mavrinac of Jefferies & Co said by phone.
"That is the reason why we have a 'buy' on it and secondly, the stock is cheap.
However, Mavrinac said DryShips is not one of his top picks. "The biggest issue in our view is DryShips' management has made decisions that we don't fully understand.
"For example, they filed this massive shelf two weeks ago to raise $500 million and based on our calculation they don't really need it. Other companies had loan-to-value covenant breaches as well and no one else diluted their shareholders as much as DryShips did.
"It requires you to take down your estimate for earnings and cash flow, and your resulting price target, but the stock is so cheap that even the reduced price target keeps it attractively valued."
SELL ON DEBT
"I have a 'sell' rating on DryShips since December. They still have a lot of debt that is coming due over the next two years that they need to raise cash to meet it, whether from their operations or equity offering," analyst Gregory Lewis of Credit Suisse said by phone.
"As long they are continuing to raise equity in the open market, I think they are acting prudently because they are using the ability to raise equity to help fund their existing debt repayments.
"My biggest question is with this $500 million worth of equity, what is your share count going to be? And is this the last tranche they are going to do? Because keep in mind they raised 25 million shares at the end of last year.
"Following this transaction will that be all the equity you need to raise? And then I will not be surprised if their answer is 'no'.
"They have debt that they need to pay and they are going for dilution because they don't have a choice."
SELL ON DILUTION
"They are doing a $500 million share offering and so we thought that was going to be highly dilutive for current shareholders. That's when we downgraded it," analyst Scott Burk of Oppenheimer & Co said.
"Structurally the company just needs a lot of capital because they have significant amount of new building (of ships)," he added.
"Until DryShips is done raising cash we think the shares are likely to have pressure on them. The only reason the shares are doing as well as they are today and over the last week or so is just because (freight) rates have been going through the roof."
Source: Reuters
Saturday, August 09, 2008
2008 Beijing Olympic Medal Tally
One World, One Dream!
