DryShips Inc. (NASDAQ:DRYS) investors are running for the hills, after the dry bulk shipping company announced that it has entered into an agreement with Kalani Investments Limited, an entity that is not affiliated with the Company. Under the agreement the Company may sell up to $226.4 million of its common stock to Kalani over a period of 24 months, subject to certain limitations. Proceeds from any sales of common stock will be used for general corporate purposes.
Kalani has no right to require any sales and is obligated to purchase the common stock as directed by the Company, subject to certain limitations set forth in the agreement. In consideration for entering into the agreement, the Company has agreed to issue up to $1.5 million of its common stock to Kalani as a commitment fee. No warrants, derivatives, or other share classes are associated with this agreement.
In addition, the Company has entered into agreements to acquire six vessels for a total gross price of $268 million. These vessels are comprised of one Aframax tanker built in 2012, three Kamsarmax drybulk vessels, one currently under construction and two built in 2014, and two very large gas carriers (“VLGCs”) currently under construction pursuant to the previously announced “zero cost” option agreement. The Aframax and the two second-hand Kamsarmaxes are expected to be delivered in the second quarter of 2017, the newbuilding re-sale Kamsarmax in the third quarter of 2017 and the two VLGCs before the end of the year. The purchase of the two second-hand Kamsarmaxes is conditional on the Company’s physical inspection and acceptance of the vessels. All the vessels are expected to be employed in the spot market except for the two VLGCs that will be employed under ten year charters with a major oil trader with total contracted backlog of about $208 million. All of the vessels are being acquired from unaffiliated third parties with the exception of the two VLGCs, which will be acquired from entities that are affiliated with the Company’s Chairman and CEO, Mr. George Economou. The acquisition of the VLGCs was approved by the independent directors of the Company based on third party broker valuations. The Company expects that these acquisitions will be financed by cash on hand, the available liquidity under the senior secured credit facility with Sifnos Shareholders Inc., an entity affiliated with Mr. Economou, and new bank debt.
On an annual basis, assuming all the vessels we have agreed to acquire have been delivered, that vessels employed in the spot market are fully utilized and earn $16,000 per day for Newcastlemaxes, $12,000 per day for Kamsarmaxes, $10,000 per day for Panamaxes, $18,000 per day for Aframaxes and $30,000 per day for very large crude carriers (“VLCCs”) and that the rest of the vessels in the Company’s fleet that are employed under time charters earn their respective fixed rate, we expect the Company’s fleet will generate EBITDA of approximately $70 million.
Mr. Economou, the Company’s Chairman and Chief Executive Officer commented:
“We are very pleased to announce the acquisition of six more vessels since the beginning of our transformation project that started at the end of last year. In the last three months, we have acquired a total of fourteen vessels with an average age of two years, for a total cost of approximately $662 million. We have been able to deploy all of the $400 million of fresh capital raised in a very short time frame taking advantage of historically low prices to diversify our portfolio of vessels and re-build our fleet’s earning capacity that will underpin our recently announced dividend policy. With this latest capital raise we will be closing the first cycle of acquisitions for DRYS and we will continue to scour the various shipping segments for further opportunities as they arise.”
Shares of DryShips are falling nearly 19% to $1.34 in Monday’s trading session. DRYS has a 1-year high of $2227.20 and a 1-year low of $1.01. The stock’s 50-day moving average is $2.15 and its 200-day moving average is $4.24.
DryShips, Inc. engages in ocean transportation services for drybulk and petroleum cargoes. The company operates its business through three segments: Drybulk and Offshore support. The Drybulk segment provides drybulk commodities transportation services for the steel, electric utility, construction and agri-food industries, which consists transportation and handling of Drybulk cargoes through ownership and trading of vessels. The Offshore Support segment consists of offshore support services to the global offshore energy industry through the operation of a diversified fleet of offshore support vessels.