DryShips is to sell 17 of its bulkers at an impairment loss of some $795m to other entities controlled by George Economou, the NASDAQ-listed company’s chairman and CEO (pictured).
Thirteen capesize and four panamax bulk carriers are to be sold for a combined price of $377m. The deals include the ships’ respective employment contract and the assumption of $236.7m of debt for certain vessels (as of September 10), DryShips said.
As a result, DryShips expects to post an impairment charge of around $373m in its third-quarter financial results this year.
The remaining 20 panamax and two supramax bulk carriers in DryShips’ fleet have been classified as held for sale, which will add an additional $442m impairment charge to its third-quarter results.
All of the firm individual transactions are expected to close by the end of the year. DryShips said certain transactions remain subject to the approval of the applicable lending banks.
UPDATE: Analysts told Splash today that DryShips’ asset sell-off is part of a longer-term plan to recapitalise the business.
“Basically the company just has too much debt relative to its earning powers, relative to what rates are. They need to do something like this to recapitalise the company,” Amit Mehrotra, Deutsche Bank’s lead shipping analyst, told Splash by phone this afternoon.
“Fast forward six months and the company will have no assets but will have very little debt, some net cash and its stake in Ocean Rig, and it can basically start anew.”
Mehrotra said the implications for DryShips’ stock are uncertain, however. The company has until October 12 to boost its share price to above the $1 per share or else lost its listing on the NASDAQ Global Select Market.
DryShips’ stock is currently trading at around $0.2321 per share and has lost around 46% of its value since markets closed yesterday.
“Equity value is impaired where it’s trading right now or is at option value,” Mehrotra continued.
It’s uncertain what price will be achieved for the sale of the remaining 20 bulkers in DryShips’ fleet, he said. The price has to be more than the outstanding debt on the vessels in order to say that they have any equity value left.
Richard Rivlin, CEO of VesselsValue.com, told Splash: “Shareholders should not be surprised and with due diligence of the IPO prospectus when DryShips went to market, it would clearly have shown that there could be transactions between the public and private company.”