As BDI Drops Below 300, Bulk Firms' Paths Diverge

Diana

By MarEx 2016-02-04 20:49:51

In trading Thursday, the benchmark Baltic Dry Index continued its fall with another record low at 298, its first value ever below three hundred points. Capesize and supramax day rates were down, while panamax vessels traded slightly higher. The worsening market is forcing an increased volume of vessel and enterprise sales, and, for well-positioned buyes, creating an opportunity to purchase at distressed-asset prices. 

In the latest sign of the trend, Norwegian owner Western Bulk has delayed payments to its creditors while seeking a reorganization, and has changed its name to Bulk Invest. Additionally, the firm announced that it has spun off subsidiary Western Bulk Chartering in a sale to investment firm Kistefos, the owner of 60 percent of Western Bulk, for a $16 million cash price, plus the transfer to Kistefos of an additional $30 million in outstanding bond obligations.

The firm announced an extraordinary general meeting for all shareholders to be held February 25 to finalize the deal and the name change.

Western Bulk CEO Jens Ismar admitted in the firm's 2015 annual report that management had misread the market, and that untimely expansion was now causing the firm significant losses, with negative cash flow in the range of five million dollars per month.

Separately, in a countercyclical move, Diana Shipping announced that it has entered an agreement to purchase three newer panamaxes from relatives of the firm's CEO, Simeon Palios, for a combined total of $40 million. The vessels, the Sunshine, Manzoni and Infinity 9, were all built by Jiangnan Shipyard, and all will be fully financed by the sellers' current creditors, with no cash outlay. Delivery is expected by the end of March 2016.

The president of Diana Shipping, Anastasios Margaronis, said that “not only has the Company been able to negotiate the purchase of these vessels at 'distressed' prices . . . but we believe that our strong balance sheet and attractive credit risk will enable us to . . . finance 100% of the purchase price that will be non-amortizing for two years.”

NYSE-listed Diana Shipping has been downgraded by many analysts in recent months to market perform or hold as the bulk sector tracks lower, but the firm may be better positioned than some rivals. Analysts Lion Square Investments suggest that it is a relatively conservative company with a strong balance sheet, little debt and reputable counterparties on its long-term charters, and well-placed to survive the market shakeout.