Saturday, July 25, 2015

Diana Shipping: Senior Notes or Preferred Shares?

On May 20th Diana Shipping Inc. (DSX) sold 8.5% senior notes in a public offering. The notes have a five-year term, maturing on May 15th, 2020. The total principal amount sold was $63,250,000 including the underwriters’ over allotment option, which was fully exercised. A total of 2,530,000 notes were sold at a par value of $25 per note. The notes are traded on the New York Stock Exchange under the symbol DSXN.

Last year Diana Shipping had raised $65,000,000 in gross proceeds, selling 2,600,000 preferred shares at $25 per share. The 8.875% series B cumulative perpetual shares are also traded on the NYSE under the symbol DSXPRB.

With the exception of the above offerings, Diana Shipping has shunned public markets for several years. Its last equity offering is dating back to May 2009. Since then the dry-cargo shipping company has relied on cash generated from operations & commercial debt to finance its fleet growth. Even though the dry-cargo market is currently very depressed and with no signs for a speedy recovery, Diana Shipping has been the most conservative company among its peers by maintaining a very comfortable level of net debt to total capitalization.

Poor fundamentals for the dry cargo shipping industry in general have raised borrowing costs, which in turn have made Diana’s senior notes and preferred shares very attractive to long-term yield-seeking investors. In this article I will compare the similarities & differences between the two securities. 

Continue reading the full article published on Seeking Alpha

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