Monday, October 29, 2012

Baltic Trading Limited - Earnings Estimate 2012 Q3

For the quarter ended September 30th, 2012, we estimate that Baltic Trading Limited (NYSE: BALT) generated net loss of $4,850,000 or ($0.22) basic earnings per share. We estimate that the company’s net TCE revenues were $5,850,000 & the fleet average TCE was $7,100. We also estimate that EBITDA were ($50,000)

As of September 30th, 2012, we estimate that the company had $101,250,000 in debt outstanding and a total book capitalization of $366,000,000. Its debt to capitalization ratio stood at 27.7%. We also estimate that the company had approximately $2,700,000 cash on hand.

BALT has an additional $33,750,000 available under its credit facility, and is able to borrow up to $23,500,000 of that amount for working capital purposes. The company’s credit facility matures in November 2017. Based on current debt outstanding, BALT does not have any scheduled debt repayments until November 2016.

The company has in the past declared variable quarterly cash dividends based on cash available for distribution, but also after taking into account the company’s cash flow & liquidity and capital resources. Based on the company’s formula for cash available for distribution, BALT would not have the capacity to declare a cash distribution this quarter. Taking into account however that: (I) BALT has paid a consecutive dividend since its IPO in March 2010, and (II) BALT has previously declared dividends in excess of cash available for distribution, we expect BALT to declare a cash distribution between $0.05 per share.

BALT operates a modern diversified fleet of 9 dry cargo vessels, consisting of 3 handy size vessels, 4 supramax size vessels and two cape size vessels, with a total DWT capacity of approximately 672,000 MT, and an average age of 2.9 years as of September 30th, 2012.

Based on last Friday’s closing price of $3.48 per share, we estimate that BALT has a market capitalization of $79,000,000 and an enterprise value of $178,000,000

Tuesday, October 23, 2012

Overseas Shipholding Group: Rumors Of Its Financial Demise May Not Be Greatly Exaggerated

Overseas Shipholding Group's (OSG) shares fell precipitously again yesterday after the company announced that it was contemplating filing for bankruptcy protection. The latest news came amid a dramatic disclosure from the company that a (yet-unexplained) tax issue involving its international operations had rendered its financial statements unreliable.

Until yesterday the main issue affecting the company's stock price appeared to be a funding gap between an expiring credit facility of $1,500 million (in February-2013), and a $900 million forward start credit facility.

Estimates from the company and analysts put the funding gap between $100 million to $300 million. But based on yesterday's news, I believe the funding gap may indeed be substantially higher.

The $900 million forward start credit facility will not be available to the company before February-2013. The facility is subject to an adverse materiality clause and compliance with financial covenants among other terms.

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Friday, October 12, 2012

How To Make Sense Of EBITDA In The Shipping Industry

EBITDA (Earnings before Interest, Taxes, Depreciation & Amortization) is a very popular, but also controversial measure of operating performance in the bulk shipping industry. It is popular because many investors base their investment decisions on EBITDA figures. In fact, most shipping companies report EBITDA in their earnings report. It is also controversial, because it is not recognized by US GAAP and lacks a universal definition. In this article I will look closely at EBITDA, its advantages and drawbacks, and how to properly use it when considering an investment in shipping. I will use as sample four publicly traded shipping companies, namely Diana Shipping Inc. (DSX), Eagle Bulk Shipping Inc. (EGLE), Genco Shipping & Trading Limited (GNK), and Safe Bulkers Inc. (SB).

EBITDA is a pro-forma accounting figure that measures the operating efficiency of a company, taking into consideration vessel operating expenses and administrative overhead. It also measures a company's capacity to service its debt obligations, and is frequently used in loan covenants. EBITDA is an indirect method of calculating a company's operating margin. In that regard, it is similar to the indirect method of calculating the operating cash flow.

One of the greatest advantages of EBITDA is that it is readily available, almost as ubiquitous as net income or earnings per share. Even when it is not reported (a notable exception in our sample is Diana Shipping Inc.), an investor/analyst could easily calculate it based on the company's income statement.

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