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  • Some Thoughts on Euronav [View instapost]
    More than two years ago John Fredriksen said “get out of (crude) tankers”. Since then, the sector crisis has led Genmar and OSG to bankruptcy, Frontline emasculated and facing a final and perhaps lethal restructuring before summer and smaller players such as DHT, TNK and NAT obliviously issuing shares to pay imaginary dividends, making any meaningful recovery on a per share basis impossible. (At least DHT and TNK have stopped doing so, making them more attractive for new investors – NAT continues in its ponzi ways.) Tsakos seems renegotiating with its banks, and poised to jump on the MLP bandwagon: they remain an interesting idea.

    But what about this blog? Compared to the initial post, Euronav did cancel their two Suezmax newbuildings (at a cost of some $57m) but did take deliver of the VLCC Alsace, paying a whopping $160m. The company continues its extreme depreciation policy – now also adopted by DHT – and did not take impairments. It avoided until now to dilute shareholders. However, Euronav did restructure its convertible bond, meaning that a bunch of new shares (25% of the current total) are now going to be available at a EUR5.65 strike price.

    The one deal anchoring Euronav is its FSO operation (FSO Asia and FSO Africa in joint venture with OSG, chartered to Maersk Oil at Qatar's Al Shaheen field). With an annual revenue of some $65m over the next five years (Euronav share), and annual cash flow from operations of about $40-45m, the segment should earn about $25m annually. In the meantime Maersk Oil, will be investing $1.6b in further developing Al Shaheen and has options on extending the charters to 2020. The outstanding debt on the FSOs is $123m, easily refinanced or increased.

    The crude spot market rates barely cover opex and the oversupply seems to continue. The Tankers International VLCC pool is losing vessels and market share. DNB said some time ago that Euronav is going to run out of cash this year. The stock is now below EUR3.30 for a total market cap of around $210m. Equity is still stated at $860m.

    Offshore operations will support Euronav. Old VLCC are carried at very low book values and will be sold off, leaving the company as an offshore and Suezmax operator.

    I had brought my cost basis at around EUR5 just before the convertible bond restructuring. The recent action in OSGIQ was a great get out of jail free card (and more, even if I closed out everything at $3.62) so I will shift the some that windfall to Euronav over the following couple of months.

    I think this year's victim will be Frontline.
    Apr 13, 2013. 12:28 PM | 1 Like Like |Link to Comment
  • Why Cyprus Is Not Really A Negative For The Euro [View article]
    Or "Why the Euro area recovery starts with Cyprus"
    Mar 18, 2013. 02:28 PM | Likes Like |Link to Comment
  • Buy Safe Bulkers: Smart Management With Skin In The Game [View article]
    Another good article. It even drew back in Zach Mansell! I will not repeat why I agree with most of your well presented arguments.

    In my view, it is certain that there will be another small offering this spring (6-7m shares, when the share goes above $5). In contrast to previous years, however, the offering will not be used to pay the dividend (which I still insist should have been cut to zero). So it may be positive for the company, not negative this time. But after a good run, I have reduced my position.

    As to impairments, I was almost sure that they would write down the two Korean vessels, which are the only ones ordered at the real top of the market and were never supported by strong charters. The rest of the fleet was bought at historical lows (the older Panamaxes and Kamsarmaxes), fairly OK prices that can be defended in an impairment test (new Japanese vessels) or expensive but supported by good charters (Pelopidas in particular).

    With the demise of almost every other stock in the sector (and the transformation of many of them into scam vehicles), it seems to me that new small investors have been attracted to SB. Some volatility is to be expected this year.
    Mar 16, 2013. 10:07 AM | Likes Like |Link to Comment
  • Assurant: Attractive At A 7.7 P/E? [View article]
    Bring back the recommend button. A well-written, thoughtful and balanced article, also explaining in very simple language some basic insurance business concepts.

    The impact of DAC is evident not only when you subtract all intangibles but also on their statutory accounts surplus. I had a look back in December on the basis of SA contributor Tim Meador's article but never got over the DAC, their reliance on agency networks and this multitude of financial specialty business that may be very much affected by regulation. Too bad for me, I guess.
    Mar 14, 2013. 04:31 PM | 3 Likes Like |Link to Comment
  • Navios Partners: Strong Management And Fleet At 20% Discount [View article]
    You should read the filings. The Aldebaran and Prosperity are owned by Japanese interests. The were under long-term charters to NM, which dropped them down to NMM, after first having secured very lucrative charter-outs.

    The two charter-ins now cost NMM, on average, about 13,500 per day per vessel, per their disclosure. Once the Prosperity charter-out expired last May, the vessel was chartered by NM for 12,000+profit share (i.e. NMM is losing some 1,500 per day only). NM in employs the vessel in the short-term time charter trade, at a loss of 4,000-5,000 (for NM). It is also NM that is losing money on the Apollon, Libra, and shortly on the Aldebaran, Hope etc.

    This is simply a detail in your article, but it sort of jumps out from the page.

    Many other people have commented on the shipping sector downturn, much earlier and eloquently than me. I'm more interested in governance. The Navios group has taken some great strategic decisions, in particular insuring the charter-outs and playing the capital markets. But their spin is intolerable.
    Feb 25, 2013. 06:03 AM | Likes Like |Link to Comment
  • Safe Bulkers' CEO Discusses Q4 2012 Results - Earnings Call Transcript [View article]
    I wasn't ironic: I do think SB has the best operational management and best attributes in its listed sector. I also recognize the mistakes they made, in particular maintaining a very high dividend.

    Settling with the Japanese and picking some good vessels from them is simply strengthening a good relationship. They will continue getting 80% Exim financing for their newbuildings and run a lean business.

    I don't know about doubling, but I'm doing very fine after buying at the lows.
    Feb 24, 2013. 04:28 PM | Likes Like |Link to Comment
  • Navios Partners: Strong Management And Fleet At 20% Discount [View article]
    Only the distribution/ROC supports the price. And only secondaries, NM eating costs, taking over vessels at above market rates and the fake MLP-tag support the distributions.

    JM, you did a lot of good research only to fumble at the goal line with your conclusions (and title).

    In the short-term, once the lucrative Aldebaran charter ends, the vessel will be chartered by NM at above-market levels but still well below the previous rate. The same will happen with the 1997-built Felicity in June and the Hope in August, making a total of 6 vessels subsidized by NM, with more to come in 2014. Perhaps NM will drop down one of the two remaining capesizes that haven't defaulted yet and NMM will also buy a vessel at the current low values. A secondary comes in Q3 or Q4 of 2013.
    Feb 24, 2013. 07:51 AM | Likes Like |Link to Comment
  • Navios Partners: Strong Management And Fleet At 20% Discount [View article]
    I don't want to be harsh, but after so many articles you've written on this sector you don't seem to get it, as the Enron guy would say.

    The charter-in section needs redrafting. It is NM that charters the Prosperity from NMM, making then a loss of $4k+, not the other way round. NM also charters the Apollon and the Libra from NMM, both at a loss, will charter the next expiring vessels and also currently supports NMM by paying part of its opex. (by the way, NMM is alos making a loss on the Prosperity, and will loose money on the next charter of the Aldebaran: the bemused NMM investor relations people must surely have directed you to their press release saying that the Prosperity and the Aldebaran are chartered-in at an average of 13,500 per day-and why would you care who the owner is?)

    NMM is hugely overvalued by any metrics, raising money at 14% to pay back debt and distributions. NM is naturally interested in keeping it afloat and will continue to sink money in.

    But Stanislav in his articles, and i, have underestimated the thirst of the u.s. investors to buy into a yield, regardless if it is a ponzu like NAT or a ROC model like NMM.
    Feb 23, 2013. 07:53 PM | Likes Like |Link to Comment
  • AerCap Holdings' CEO Discusses Q4 2012 Results- Earnings Call Transcript [View article]
    Gus Kelly, the CEO, has the consultants' tendency to use the interlocutor's first name as many time as possible - more obvious in older transcripts. He must be on the road ten months out of twelve in conferences selling the stock.

    But finally AER is in an upwards trajectory and the analysts seem to like them. The market less so but it is one stock that seems able to gain another 30% by end-2013 in a flat general market.
    Feb 21, 2013. 06:10 PM | Likes Like |Link to Comment
  • Safe Bulkers' CEO Discusses Q4 2012 Results - Earnings Call Transcript [View article]
    Well, EPS will go down, the dividend should have been fully cut two quarters ago and all money should have been kept in the company. But operationally, yes the best management out there.

    With a history of working together with their Japanese charterers (some years back SB paid compensation to release below-market charters, now the opposite), they now buy vessels from those same charterers at very slightly above market value.

    The transcript should be cleaned up, the CEO is very interesting when talking about his trade.
    Feb 21, 2013. 06:03 PM | 1 Like Like |Link to Comment
  • Navios Acquisition: Unwinding The Spin [View article]
    Well, what NNA did not advertise in its Q4 press release is its covenant breaches. However, today's capital raise shows that the banks are very careful and demand fresh equity.

    NNA simply did not have the cash to pay the (increased) equity for its newbuildings, interest, maintain $40m cash and acceptable leverage (they don't pay management fees/opex anyway).

    The question is whether $100m raised is enough. Yes and no. NNA will now raise its dividend in order to boost the share price and do another secondary in which NM can convert the intercompany debts and sell down.
    Feb 21, 2013. 05:56 PM | Likes Like |Link to Comment
  • Investors Should Be Wary Of InterOil [View article]
    I think that's a logical conclusion. Coupled with "no bids value the company fairly so we raise a bit of cash and go at it alone for another couple of years". The recent positive articles seem written by the same PR firm. To be honest, I don't think your article is particularly well written either, that's why you get so many personal attacks.

    I have no position but I'm interested in corporate governance and how capital markets can be abused can so I've been following a bit the various IOC articles.
    Feb 16, 2013. 09:20 AM | Likes Like |Link to Comment
  • Can Societe Generale Ever Be Relevant Again? [View article]
    Very good article. The cash dividend cut, strong/tradiotional shareholder base and French establishment and central bank support are also relevant factors. I also had turbo warrants base 14 bought when GLE was at 16 eur during the summer in a very profitable trade.

    I agree that any further upside will be linked to the perception that the "crisis" is over. I also think that the comment above as to the politically-driven GLE investments abroad is spot-on.

    A very similar article can be written for ING. Euro insurance companies hit by sovereign debt concerns - ageas, aegon, allianz - were also good investments.
    Jan 12, 2013. 05:23 AM | 1 Like Like |Link to Comment
  • Navios Acquisition: Unwinding The Spin [View article]
    Due to related parties cont'd, as at:
    - Q1 2012: $55.3m
    - Q2 2012: $71.0m
    - Q3 2012: $79.9m +$30m loan = 2xannual operating cashflow.

    The disconnect between recent product tanker rates and NNA's share price could be attributed to the certainty of covenant breaches under all credit facilities as the leverage test (not the one shown in the presentations) is reaching 95-100% (no equity).

    Waivers will be granted, perhaps at a price. It is more than logical for NM to convert the intercompany loan and receivables into equity to give NNA some breathing room.

    In the meantime, Scorpio has started conference calls that sound more than fireside chats (one hour or more of Q&A). It has now a cult following among basically all analysts and PE shops who can't wait to gobble up successive secondaries which are seen not as dilutive but as votes of confidence - even if the product tanker sector supply is increasing precipitously once more.
    Dec 15, 2012. 06:34 AM | Likes Like |Link to Comment
  • Safe Bulkers: Would Low Valuation Lead To A Management Buyout? [View article]
    Hi Lambros - I'd like to add that you should add another $384m i.e. the 2007 dividend to the Hajioannou pre-IPO/IPO cashpile - so a total of $740m - the company had negative equity when it IPOed. This and the hefty dividend means that there was no point in skimming the company through inflated management fees, travel agencies and other bizarre transactions.

    I think one capesize is chartered to Eastern Power, a Tata subsidiary (see F-1) and the other may be to Arcelor Mittal (based on client list and various conference calls where they spoke about capes chartered to Indians).

    I don't see a buyout. A listed vehicle is the goose laying the golden eggs. If the cycle turns, a listed company with good assets can raise fresh money all the time and pay dividend to the major shareholder. If the cycle stays really low there will be better opportunities to recapitalize the company and retain control at lower prices - and the banks will always welcome an equity line to finance debt repayment. Angelicoussis may wish he were listed right now.

    The decision to cut the dividend, even if late and even if not the cut was not a total one, shows that they want to stay in the market. Besides the Koulitsa, I think they bought a second vessel from client K-line, the Freia. I fully agree with your last paragraph even if not with the last sentence.
    Dec 15, 2012. 06:08 AM | 1 Like Like |Link to Comment