Tuesday, February 25, 2014

Shipping Preferred Shares

I recently had the opportunity to publish a detailed survey of shipping preferred shares on Seeking Alpha. Shipping companies have been busy issuing preferred shares as a way to raise equity funds without diluting common shareholders. 

Whether preferred shares are a one-time hit wonder or a permanent trend remains to be seen. But there has been a critical mass of these securities to warrant monitoring & follow-up. In the table below, I intend to update all pertinent information on existing shipping preferred shares, as well as new issues. 

I welcome your feedback on what information you would like to see and of any preferred shares I might have missed / should include in my survey.

Monday, February 17, 2014

Diana Shipping Inc. - Earnings Preview 2013-Q4

I estimate that Diana Shipping Inc. (DSX) will report a net loss of ($8,800,000) or ($0.11) basic loss per share for the last quarter of 2013. The company’s bottom line for the quarter has been negatively affected by the results of Diana Containerships Inc. (DCIX). During the quarter Diana Containerships sold one vessel for scrap, and took an impairment loss on a vessel scheduled for demolition this month. Based on my estimates, Diana Shipping’s loss from its investment in DCIX for the quarter was ($1.9 million).

The results were also negatively affected by the early redelivery of M/V Houston. The company had to write-off the entire $3.05 million prepaid charter revenue associated with M/V Houston during the quarter, instead of the scheduled $0.75 million amortization. 


As of year-end, Diana Shipping had total debt outstanding of $433 million, and cash on hand of approximately $240 million. Last August, the company had extended a four-year $50 million loan to Diana Containerships. This month Diana Shipping returned to the capital markets, raising $60 million in gross proceeds through the sale of 2.4 million preferred shares. The preferred shares pay an annual dividend of 8.875%.

As of year-end, the company operated a fleet of 36 owned vessels with a total DWT capacity of 4.1 million MT and an average age of 7.22 years. Diana Shipping currently has five new-building vessels under construction, two of which are scheduled for delivery in the first half of this year, and the remaining in 2016.

The shares of Diana Shipping are traded on the New York Stock Exchange and closed on Friday at $12.69 per share. Its current market capitalization is approximately $1.05 billion.

Thursday, February 13, 2014

A Survey Of Shipping Preferred Shares

Last Monday, Diana Shipping Inc. (DSX) tapped the market to raise $60 million by issuing 2,400,000 million series B preferred shares. This is the fourth time this year that shipping companies have issued preferred shares as an alternative to common equity. Earlier this year, Costamare Inc. (CMRE), Navios Maritime Holdings Inc. (NM) and Seaspan Corp. (SSW) raised $100 million, $50 million and $125 million respectively.

This follows a very busy year last year, when Tsakos Energy Navigation Ltd. (TNP), Safe Bulkers Inc. (SB), Box Ships Inc. (TEU), and Costamare Inc. (CMRE), had raised in excess of $215 million in preferred shares.

Preferred shares are hybrid securities that share elements with both corporate debt and common equity. They offer a great alternative to raise equity without diluting common shareholders. Yield seeking investors may find the risk-reward profile of preferred shares more suitable than common shares.

For a complete survey of common characteristics and differences of shipping preferred shares, please continue reading the full article published on Seeking Alpha.

Friday, February 7, 2014

Diana Containerships Inc. - Earnings Preview 2013-Q4

I estimate that Diana Containerships Inc. (DCIX) will report a net loss of ($19,400,000) or ($0.57) basic loss per share for the last quarter of 2013. The company’s bottom line for the quarter has been affected by three one-time events:

In December the company sold for demolition the 18-year old Spinel (formerly APL Spinel) for $9.65 million. I estimate the loss on the sale of Spinel will be $11.5 million (including $1 million in direct sale and other charges). In addition, the company just announced the demolition of 18-year old Sardonyx (formerly APL Sardonyx), a sister ship to Spinel, for $10 million. I anticipate that DCIX will record the approximately $9.2 million impairment loss for Sardonyx in the fourth quarter, to start with a clean slate for 2014.
Finally, the company had a gain of approximately $660,000 from the early redelivery of Spinel. 

Excluding these three events and based on my estimates, DCIX would record a net gain of $640,000, or $0.02 basic earnings per share. Based on cash generated from operations during last quarter, I expect that Diana Containerships will declare a quarterly cash distribution of $0.15 per share, unchanged from the previous two quarters.

After the disposal of Spinel, the company will own a young fleet of seven vessels plus the 18-year old APL Garnet.

Since last April and including the sale of Spinel, Diana Containerships will have disposed of five vessels for a total book loss of almost $60 million. I do not anticipate any further demolitions during 2014, since the APL Garnet is on a lease back charter with Neptune Orient Lines with earliest expiration in August 2015.

Diana Containerships has total indebtedness of $148.7 million, including $98.7 million from its $100 million credit facility with RBS and a $50 loan from sister company Diana Shipping Inc. (DSX). The $100 million credit facility matures in January 2017, whereas the $50 million loan is due in August 2017.

The shares of Diana Containerships are traded on the New York Stock Exchange and closed on Friday at $3.99 per share. Its current market capitalization is approximately $136 million.

Tuesday, February 4, 2014

The Coming IPO Of Diamond S Shipping Group

A new year, a new shipping IPO by private equity investor Wilbur Ross. Following on the steps of the very successful IPO of Navigator Holdings Ltd. (NVGS) last November, Diamond S Shipping Group, Inc. (DSG) filed today a registration statement with the SEC for an initial public offering.

Diamond S Shipping Group, Inc. currently owns a fleet of 33 medium range (MR) product tankers. The company had acquired the first 30 vessels from CIDO for $1.165 billion in 2011. Last December Diamond S acquired an additional three vessels from CarVal (an investment arm of Cargill, Incorporated) for $83.7 million. 

The IPO is intended to finance part of the acquisition cost of ten MR new-building vessels, currently under construction in Korea. The vessels will be delivered from September 2014 through January 2016. Diamond S has agreed to pay $380 million for the ten new-building vessels, and intends to raise $190 million, or 50% of the purchase price, in the upcoming IPO.

I have just started peering through the 206 page-long registration statement. I intend to follow-up with a complete analysis and valuation in the coming days. Until then, I would like to make the following observation:

The consortium of private investors led by WL Ross & First Reserve first committed $1 billion in equity to Diamond S Shipping Group in August 2011. The equity infusion was meant to finance the acquisition of the 30 MR tankers from CIDO, plus the construction cost of ten new-building vessels (eight Suezmax and two LR2 product carriers), that Diamond S had already ordered.

Those ten vessels, which have since been delivered to the company, are conspicuously absent from the upcoming IPO. Diamond S has decided to market itself as a pure MR play. Given the buzz surrounding medium range product tankers on Wall Street these days, I cannot blame them.

Scorpio Bulkers Inc. - Charter-In Agreements For Five Dry Bulk Vessels

Less than a month after its largest new-building order and a fully subscribed IPO, Scorpio Bulkers Inc. (SALT) has struck again, albeit more modestly. This time it announced the leasing of five vessels (two Panamax, two Kamsarmax, and one Post-Panamax) on medium-term charters (of about one year or less), at an average rate of approximately $15,000 per day. Details of the charters are as follows:


I do not expect the charters to make a material contribution to free cash flow or the bottom line. The company will have approximately 1,500 trading days at $14,935 per day to turn an operating profit. The daily cash break-even rate is more or less in line with the current FFA curve if not slightly higher. 

On the other hand the charters will help the fledgling company set up its chartering department and get its feet wet in spot freight trading. 

The article was published on gCaptain on February 4th, 2014 

Saturday, February 1, 2014

Scorpio Bulkers Inc. - Like A Bull In A China Shop

Dry cargo start-up Scorpio Bulkers Inc. (SALT) has managed to go from zero to one hundred in less than twelve months. Since its incorporation in March 2013 it has grown to a serious contender in the dry cargo shipping industry. Scorpio Bulkers has raised more than $1.2 billion in gross proceeds in four equity offerings, including a fully subscribed IPO last December. Today, it sports a market capitalization of almost $1.4 billion. Despite its over-ambitious $2.8 billion new-building program, it has raised sufficient cash to keep its leverage ratio below 60% without any further equity offerings.

Is this folly or sanity? Only time will tell whether Scorpio Bulkers will become the most successful story this side of Frontline Ltd. (FRO), or be blown apart. But if potential investors like the odds for a strong recovery in dry cargo shipping over the next two years, they may want to take a good look at Scorpio Bulkers.

Continue reading the full article published on Seeking Alpha Pro.