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Gravity? What gravity’s that? Dated : 18-10-2007

New York broker Compass Maritime remarks on the tendency of tanker prices to remain strong even when freight rates weaken.
“It seems that the same will apply to bulker values,” it notes, “especially since we now have 20+ public dry cargo companies with massive market caps and strong balance sheets with the declared strategy to expand their fleets ‘through selective, timely accretive vessel acquisitions’.”
Equity offering linked with S&P
There is a relationship between the recent bout of secondary equity offerings and a new round of vessel purchases.
After a blockbuster Cape deal last week, where DryShips stepped up to pay $145M on a May 2008 Capesize delivery from Golden Ocean, another listed entity, Diana Shipping, is now reported to have eclipsed last week’s record price for a Capesize vessel.
Drytank, the private company, is linked with the purchase of the 1995, Taiwanese-built 149,000dwt Tiger Lily at $90M.
Compass Maritime’s market report shows that Diana – basking in the sun of $288M in market largesse from its recent shares issue – has committed to acquiring two ships from NS Lemos en bloc for $275M. The vessels are Thalassini Niki of 171,000dwt, launched in 2005 at Daewoo, and Thalassini Kyra of 164,000dwt, built in 2002 in Taiwan.
The newer vessel is tied into a lengthy period charter with three years to go, at $55,000 a day.
A three-year new charter on a modern Cape today is worth about $70,000-80,000 per day, which suggests a charter-free value north of $150M for the Daewoo vessel.
Ship values, with implicit inferences to vessel earning power, are linked with stock prices, with equity analysts opining on shipping stocks carefully monitoring sale and purchase transactions.
Jefferies bumps up targets
Consider that Jefferies & Co bumped up targets on DryShips to $108 per share after the Capesize acquisition announcement. DryShips easily blew through this target on its way to $120 per share, which was more than double its price at the end of May 2007.
This is one of the strongest-performing NASDAQ stocks, suddenly sporting a market capitalisation of $4.3Bn, which is twice that of Overseas Shipping and equal to that of Teekay if you use figures preceeding its upcoming conventional tanker spin-off.
Another listed company, Paragon, is believed responsible for two very strong purchases, $89M each for two 74,000dwt Panamaxes built in 2006 at Hudong.
They are Iolcos Destiny and Anny Petrakis, both with charters attached.
Greek buyers scoop Panamaxes
A Greek buyer, possibly DryShips or Drytank, paid a firm $62.3M for the Mitsui-built (2000) Aegean Hawk, with delivery scheduled for February 2008. Also from a Greek buyer, a 1981-built Panamax – Standard Vigour, a B&W type built in 1981 – was obtained for $25M.
In the Handy sizes, a Danish purchaser paid $62M en bloc for Mount Cook, built in 1996, and Amazonia (1994); they are both Japanese-constructed, 28,000dwt ships with 30-tonne cranes.
In the tanker sales, Ship Finance was widely reported to have sold its single-hulled VLCC Front Duchess – built in 1993 at Hyundai HI – for $56M, probably for conversion into an ore carrier.
Two single-hulled, 100,000dwt Aframaxes built in 1990 at Onomichi were also reported sold for conversion, fetching $28M each.
Brokers suggest that the dry market tone is “giddy”. In practice, this means that some deals are being done without the requisite inspections and that sellers can dictate contract terms.
For DryShips, sales of older vessels have assisted in financing its acquisition programme. Its Lanzorote, 73,000dwt and built in 1996 at Hudong, is reportedly now on the market. Broker estimates for a 10-year-old, charter-free Panamax range from $70M to $77M and provide expectations of just how much the company’s coffers might swell.
Source: Fairplay International Shipping Weekly, Sale And Purchase, 18 Oct 2007
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