DryShips in buying spree

May 12 2017

Drybulk and tanker owner DryShips said that it had cash and cash equivalents of around $340.7 mill at the end of the first quarter of this year.

The net book value of the vessels was about $286.2 mill.

On 10th May, 2017, the company agreed to purchase a Suezmax under construction in China from a company affiliated to chairman and CEO, George Economou.

DryShips said it will finance the total gross purchase price of about $64 mill using cash on hand and expects to take delivery of the vessel this month.

The vessel will be timechartered back to the seller and employed from the time of delivery under a five year timecharter, plus optional periods, in charterer’s option at a base rate, plus a profit share. The charterer will also be granted a purchase option at the end of each firm period.

The total expected backlog under the timecharter, assuming an average spot market for Suezmaxes for the next five years of $25,000 per day, was estimated to be around $43.1 mill.

Earlier this month, the company received a firm commitment from a major European bank and an Asian export credit agency for a secured term loan facility of up to $200 mill to partly finance the delivery of its four VLGCs. The commitment remains subject to documentation and successful syndication.

DryShips has raised about $570 mill of equity during the past six months, which was used to acquire modern vessels in multiple ship segments in order to take advantage of historically low vessel values.

In total, the company agreed to acquire 17 vessels, with an average age of two years, of which 12 are from unaffiliated third parties, for about $765.5 mill, of which $219.2 mill has already been advanced.

As a result of the acquisitions, DryShips is now involved in four different shipping segments - drybulk; tankers, comprising of two Aframaxes, one Suezmax and one VLCC; LPG carriers, comprising of four VLGCs; and the offshore support sector.

On an annual basis, assuming all the vessels to be acquired are delivered and fully utilised and earn $18,000 per day for Aframaxes, $25,000 per day for Suezmaxes and $30,000 per day for VLCCs, plus the drybulk carrier and the rest of the vessels in the company’s fleet employed under timecharters will earn their respective fixed rates, DryShips estimates for indicative purposes that its active fleet will generate EBITDA of around $77 mill.

Economou commented: “DryShips has come a long way since last year when we were fighting for the company’s survival. Since then we have cleaned up the company’s balance sheet and almost doubled our fleet by acquiring modern quality vessels.

With this rapid expansion phase behind us we look forward to taking delivery of the vessels we have acquired in the last few months at historically low asset values and starting to generate revenue that will improve our bottom line and demonstrate the earnings capacity of our fleet over the next few quarters, he concluded. 

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