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  • StealthGas: Hungry For A Buyback [View article]
    As I've been doing in a number of articles on GASS, I addressed mainly the statement that the CEO is not aligned with the interests of his shareholders. This seems to be incorrect both in relative (compared to peers) and absolute terms.

    I don't think operational cash flow is free cash flow. First, depreciation is a real cost that should not be ignored. Second, GASS has high debt repayment obligations and covenants to comply with. Buybacks reduce equity and the relevant ratios. The value of its product and aframax tankers has plunged and there is a number of old LPGs in the fleet that may stop producing adequate returns in the future. As Sava said above, this is not a mortgage fund where NAV can be easily realized.

    I like buybacks too. Many capital intensive companies are trading below NAV (I like an aircraft lessor, AER and I couldn't understand last year why they wouldn't buy shares back, in an article similar to yours). I'm just saying that you should not be so categorical against the expansion and management. It's not that the share is still at $4.
    Nov 10 08:49 AM | Likes Like |Link to Comment
  • StealthGas: Hungry For A Buyback [View article]
    I have become a fan of Harry and his company, and an investor since summer. He is the only CEO/owner in the general shipping sector who has frozen compensation and eliminated bonuses to himself, frozen or reduced management fees to himself, supports with his own cashflow the mistimed purchases of the MR tankers (see charter of Alpine Endurance) and prudently repurchases shares from time to time. The newbuildings are very high spec and the price is the one his private company ordered them for. In short, even if I'm sure he holds the same opinion about U.S. investors as most Greek shipowners (not a flattering one) and he is hilariously rude in the CCs, he treats them fairly.

    I also liked the buybacks by the way and much prefer them over dividends. But he was explicit in the Q2 CC that the company enters a second phase of expansion. Interest rates are low and shipyards are hungry. The small LPG sector seems very steady. Harry is young, ambitious and wants to start a legacy. And I'm not sure Buffett ever paid a dividend and only after having built his empire he did some buybacks.
    Nov 8 05:45 PM | Likes Like |Link to Comment
  • Property & casualty insurers could see earnings fall by an average of 26% after Hurricane Sandy, Morgan Stanley says, cutting estimates by more than 40% each for Allstate (ALL), Chubb (CB) and Travelers (TRV); ACE and AIG also could take a hit. The firm's favorite P&C broker is Marsh & McLennan (MMC), which it says offers 15%-plus EPS growth and a ~3% dividend yield at an attractive valuation. [View news story]
    MS: "We note there is little cushion left for future 4Q cat losses with 2 months remaining."

    At the same time quality P&C insurers and basically all Bermuda reinsurers have been reporting excellent earnings this year because of sustained increased pricing and the benign cat year. But alas the focus of MS is on quarterly performance.
    Oct 31 06:15 PM | Likes Like |Link to Comment
  • Overseas Shipholding: Rumors Of Its Financial Demise May Not Be Greatly Exaggerated [View article]
    I think the whole point here is not whether the syndicate backing the $900m facility will fund. It is the essentially the same syndicate ALREADY funding $1,500m on an unsecured basis i.e. ranking side by side with all the notes (unless I'm missing something) and trade creditors.

    So the real question is how the syndicate will avoid seeing that $1,500m going up in smoke. Until now the problem had been how to restructure the charter-ins (which is the real blood-letting - if it hadn't been for the charter-ins, OSG would have already restructured). In addition, I don't believe the banks want to see the money go to suddenly realized deferred tax due from profits of decades past.

    I always agreed with a number of SA commenters that OSG's extremely arrogant management has made huge business errors but I counted on the self-interest of the banks to provide a temporary spike (so I have positions at $5+). Then the whole tax issue came up making secured refinancing impossible and destroying my trading thesis (perhaps even the $900m facility with the negative pledge has already triggered something). It is a shot to nothing to still believe in the banks' self interest now, when bankruptcy is priced in.
    Oct 31 02:01 PM | 1 Like Like |Link to Comment
  • Has Deutsche Bank Been Fudging Its Numbers? [View article]
    The whole point of the linked article is that DB (and other banks) should get rid of their investment banking business - essentially because comp eliminates returns.

    This has very little to do with DB's asset/liability base, which has been expanding not because of the IB business but because DB has been buying deposits/loans (Deutsche Postbank and other assets) - IN ORDER to reduce reliance on IB business.

    Of course the premise is true: all banks fudge IB numbers - but I think you are mixing two different things and match them with a sensationalist title with no real point.
    Oct 31 01:12 PM | Likes Like |Link to Comment
  • DHT Holdings: Afloat After Its Q3 Earnings Release, But For How Long? [View article]
    In my view, cutting the dividend, taking the impairment and moving towards a more aggressive depreciation schedule (which has nothing to do with tax, as DHT does not pay tax) are the best decisions the company has taken in the last three to four years. What is the point of yield if your principal is sinking? DHT enters into a defensive move, every month milking OSG goes directly to equity. Even if OSG files they will be in better position that all peers still handing out cash.
    Oct 25 08:55 AM | Likes Like |Link to Comment
  • ACE Limited's CEO Discusses Q3 2012 Results - Earnings Call Transcript [View article]
    Another excellent call with management that thinks ahead.
    Oct 24 05:44 PM | Likes Like |Link to Comment
  • Some Thoughts on Euronav [View instapost]
    A bit more than a year after this post Euronav remains just above water while most of its peers (except TK) have essentially wiped out their shareholders.

    GNK has gone bankrupt and OSG is teetering on the brink (even if I thought it would be next year after an initial debt extension). FRO's fleet has become irrelevant. The NAT ponzi scheme is unravelling, TNK is not far behind. TNP is suffering from its high debt and is going the spin-off MLP way. NNA has zero equity left and will pay to receive waivers on all its credit agreements.

    The losses will continue with a probable huge impairment at the end of this year. However, Euronav's sale of a 1999 VLCC at $35m still producing a $7m book gain ( shows how extreme depreciation is in the best interest of shareholders. Euronav will slowly sell or convert all its VLCCs, remaining an owner of young Suezmax vessels, which even if expensive are written down very quickly. I still think that the equity is mispriced.

    Btw, DHT has gone through a series of recapitalizations destroying huge chunks of investors' money but finally cut the suckers' dividend and brought down vessels' useful life to 20 years. Signs of rationality. Good entry today.

    Keep to good accounting.
    Oct 24 05:13 PM | Likes Like |Link to Comment
  • Overseas Shipholding Group: Why Now Is a Great Time to Buy [View article]
    The company has made successive atrocious business decisions over the past years. The crude and product tanker markets remain oversupplied. Mister C above has been calling for a OSG failure for a long time. I have personally never been a proponent and only been interested here because of the lack of obvious corporate governance failures
    (as in so many shipping companies) and the trading potential.

    An unsecured banker seeing someone draw down the line like that must sweat bricks knowing that all the bonds are up together with the chartered tonnage claims. In my view, the question is whether a pre-packaged Ch11 is imminent or not. Does it really matter if the equity is valued at $300m ($10 PS), or $100m? Either it is in Ch11 or not. It is quite binary. Definitely not investment grade.
    Oct 16 04:25 PM | 1 Like Like |Link to Comment
  • Overseas Shipholding Group: Why Now Is a Great Time to Buy [View article]
    Drawing down the unsecured credit line was a clear message to OSG's banks that they had better work with the company to restructure the debt or else stand in line together with any other unsecured trade creditor (in particular owners of the chartered-in vessels) in a Chapter 11 filing. The banks are going to lose bigtime here. They have very little leverage.

    OSG has been a trader's dream and there is at least one more big spike ahead.
    Oct 13 08:57 AM | Likes Like |Link to Comment
  • Safe Refuge In A Shipping Portfolio [View article]
    Nice article. Safe Bulkers is by far the best run U.S.-listed drybulk company from an operational cost perspective. The CEO has made over $500 million in cash from the dividends prior to the IPO and the IPO and does not need to fleece the company with overstated fees or share awards. He has warmed up to his public role and is very straightforward in the conference calls - you also learn a lot there. The fleet is great, the long-term charters too and the all-in (hedged) financing costs is low. They are exposed to charter-party risk even if I would be more worried about the capesizes chartered to unspecified Indians rather than Daiichi, which is no Sanko.

    However, they should have cut the dividend a long time ago. The hidden cost affecting their liquidity is the $45m annual dividend. The two capital raises they did essentially paid for the last two annual dividends.

    In view of the continuing downturn, I hope they will cut the dividend. This means of course that the stock will tank. It is my favorite company in the sector and I have commented on it a lot but I sold most of my position before the last secondary and all of it as soon as the price recovered afterwards.

    In the group of "respectable" U.S.-listed drybulk companies (i.e. the Navios group, SB, DSX, ESEA and basically that's it), Diana is a very badly run outfit from an operational perspective. Every category of cost is high and the company bought not only the CEO's shipmanagement company at a high premium during the good times but also his office building at a time when they knew office buildings in Greece would become unsellable. They raised cash every time they bought a vessel in order to be able to pay a dividend on the side (DSX was a quasi-full payout company).

    Having said that, they have been calling for today's downturn (and worse) for years and made the fabulous strategic decision to cut the dividend. The cash-pile is staggering (and could have been quite a bit more if they ran a lean business). Asset play trumps operating efficiency all the time in shipping (for extraordinary gains) and they are best positioned in this respect. Personally I am not interested for reasons related to their corporate governance but they are in a better position than SB.
    Sep 20 01:16 PM | 2 Likes Like |Link to Comment
  • Assessing My Recommendations After One Year [View article]
    I have been following you since your first article on Greenlight Re. I don't always share your theses, in particular in certain industry sectors - GLRE is a very good example. But I find your articles professional and educating (e.g., for me at least, the telecoms ones). I hope you keep it up.
    Aug 14 07:10 AM | Likes Like |Link to Comment
  • Overseas Shipholding Group Management Discusses Q2 2012 Results - Earnings Call Transcript [View article]
    Morten Arntzen may not be "as undisciplined to put a valu[e] in one of our joint venture in any of type of public settings" but the Platou analyst was absolutely correct: his CFO was indeed "undisciplined" enough to put a value of $168m on the LNG joint venture in September 2011 at a Jefferies conference. In fact, Myles Itkin put a lot of numbers out there at the time. It's in the same highly optimistic presentation valuing OSG at $40 per share when they were trading at $16.5.
    Aug 1 04:56 PM | Likes Like |Link to Comment
  • StealthGas: Abandoning Shareholder Interests? [View article]
    I'm not sure you fully realize that almost all of Stealthgas' newbuildings were contracted in 2008-9 with forward deliveries (at relatively high prices but at the same time the company raised its initial and secondary capital at high prices, so it's somewhat of a wash). In fact the fleet is being downsized over the last years to accommodate the expensive expansion. Like the contracts, most of the financing on these vessels was committed and the company is wise to keep its cash in order to potentially invest now that its previous newbuilding programme is almost complete or, pay back debt. Handing cash out as dividends would increase leverage and achieve nothing.

    There are many companies out there handing dividends without regard to actual earnings in order to artificially raise their share price and then raise fresh money from income-oriented investors, so you are spoilt for choice there. But I would look at how GASS management/owners pay themselves in order to judge if they care about shareholders.
    Jun 28 05:12 AM | Likes Like |Link to Comment
  • StealthGas: Abandoning Shareholder Interests? [View article]
    Most shipping companies in the U.S. markets consider their shareholders as sheep and fleece them regularly, dangling stupid carrots like token dividends to keep them hooked while management/owners pocket half the company in cash and shares. Vafias considers sector analysts and shareholders as sheep (the conference calls are hilarious) but there is no evidence of fleecing - early boom-time expensive acquisitions are a business error.

    It makes absolutely no sense to hand out cash during a downturn - if you do have capital, you continue to reinvest through the trough. The real issue is that the particular sector does not really have huge ups and downs. As much as Vafias points out that there is no real crisis in the small LPG sector, there may never be an instant boom. But "abandoning shareholder interests"? He hasn't given a bonus to himself for years.
    Jun 25 05:10 PM | Likes Like |Link to Comment