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Lambros Papaeconomou

 
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  • Nordic American Tankers Is A Sucker's Bet [View article]
    You are correct: Vessel valuations correlate very well with one-year time charter levels, which in turn follow a volatile spot market.

    What has saved NAT and most public shipping companies is that they prepare their financial statements in accordance with US GAAP.

    US GAAP are very conservative when it comes to asset impairment.

    If shipping companies used International Accounting Standards instead, they would have had to write down the value of their assets a long-time ago.
    Feb 27 06:01 PM | Likes Like |Link to Comment
  • Diana Containerships Earnings Preview [View article]
    Sale-leaseback transactions are not necessary but are quite popular, because they provide cash flow visibility to the buyer (in this case the shareholders of DCIX).

    Because the management of DCIX has put such emphasis on full dividend payouts, I suspect that any new units will also be sale-leaseback deals.

    I don’t know if there is such thing as “sale-leaseback spread”. My guess is that the premium above fair market value is negotiable and depends on how much financing the buyer is willing to provide the seller.

    It goes without saying that prepaid charters are also subject to increased credit risk, because in the case of default, the buyer would not be able to replace them in the open market. But realistically, signatures like A.P. Moller or Neptune Orient Lines are first class.

    As to straight sales, of course they are possible, but is the company’s management prepared to bite the bullet, or would rather try to weather the storm?
    Feb 18 09:26 PM | Likes Like |Link to Comment
  • Diana Containerships Earnings Preview [View article]
    I did read your article but haven’t had time to go through all the comments yet. I promise to follow up.
    Feb 18 09:07 PM | Likes Like |Link to Comment
  • Diana Containerships Earnings Preview [View article]
    Yes, unless they add more units to the fleet (see my comment below).
    Feb 16 12:40 PM | Likes Like |Link to Comment
  • Diana Containerships Earnings Preview [View article]
    Container vessels trade longer that bulk carriers, and given that they paid $22-$24 million only a year and a half ago, I like to believe they will not sell the vessels for scrapping.

    They have cash on hand of $30 million plus, so it is feasible that with some extra debt ($30-$50 million?) they can purchase one or two additional units. Tapping the market for fresh equity is also a possibility.
    Feb 16 12:38 PM | Likes Like |Link to Comment
  • Diana Containerships Earnings Preview [View article]
    If you are referring to the leases for the three Maersk vessels that are coming up beginning in May 2013 (where the charterer has the option to extend for one year at $25,000 per day), I say the likelihood of extension at that rate is zero.

    But A.P. Moller may still employ the vessels on renegotiated (read lower rate) terms.

    Re replacement rates, remember the Centaurus was fixed for 8 to 12 months at $7,500 last August. The three Maesrk vessels are larger so they may command say $9,000-$10,000 a day?

    I hope to get some guidance during the earnings conference call on Tuesday.
    Feb 16 12:29 PM | Likes Like |Link to Comment
  • Nordic American Tankers Is A Sucker's Bet [View article]
    Thank you for your comment.

    As a general rule I am leery of related party transactions, but I do not believe that the $25 million sale of Scandic to the company is a game-changer in any event.

    Quite frankly, only the CEO knows what his motivation(s) were.

    With regards to privatization, an LBO would indeed be extremely difficult, especially for a company with no cash flow visibility (all vessels trading in the spot market).
    Feb 15 10:57 AM | Likes Like |Link to Comment
  • Nordic American Tankers Is A Sucker's Bet [View article]
    I still don’t understand your premise. Usually, when management thinks that a publicly traded company is undervalued, they try to privatize it through a management buy-out.

    In this case the CEO did the exact opposite. He sold his private entity back to the company.

    Remind you that the private management agreement had existed for eight plus years, since when the CEO assumed operational control of NAT.
    Feb 15 07:07 AM | Likes Like |Link to Comment
  • Nordic American Tankers Is A Sucker's Bet [View article]
    You are correct that the price to book value is low at 0.61. But this is because the company carries the vessel book values based on historical cost and not current market values.

    The average book value per vessel is approximately $48 million, which has no relevance to today’s asset values. Case in point: NAT just took a $12 million asset impairment loss.

    If you want to buy the stock believing in a turnaround, you have to consider how much you have pay to acquire each one of the company’s vessels.

    At $8.95 per share you will be paying approximately $34.5 million per vessel.

    The average age of the company’s fleet is 11.6 years. A 10-year old suezmax today is worth $30 million (Source: RS Platou).

    The stock is not cheap on an NAV basis
    Feb 13 09:02 AM | 1 Like Like |Link to Comment
  • Nordic American Tankers Is A Sucker's Bet [View article]
    Here are the cash distributions of Navios Maritime Partners (NMM), a dry-cargo shipping MLP, compared to its operating cash flow for the last three years (all figures in $1,000s)

    Year 2010: Cash Distribution $72,316, Operating Cash Flow $96,018
    Year 2011: Cash Distribution $95,444, Operating Cash Flow $127,464
    Year 2012: Cash Distribution $106,878, Operating Cash Flow $179,081

    Its cash distributions were less than its operating cash flow (the company is properly setting aside cash reserves for capital expenditures), unlike NAT where its cash distributions consistently exceed its operating cash flow.

    You are right that the recent buyout of Scandic paved the way for the CEO to sell his private management company back to NAT for cash and shares. I plan to write a separate note on this and other related-party transactions by the company.

    But how can this related-party transaction be a precursor of a future sale of the entire company?
    Feb 13 07:22 AM | 1 Like Like |Link to Comment
  • The Devil In The Details: Eagle Bulk Shipping's Debt Restructuring [View article]
    Notice today’s press release for M/V Polymnia, DSX’s recently acquired Post Panamax vessel. The vessel was fixed for about two years (i.e. for years 2013 and 2014) at $7,600 per day, an amount that is not sufficient to cover even cash operating costs (vessel operating expenses, dry-dock costs, plus cash G&A).

    What is even more telling, DSX had to give charterers a free option for an extra year (year 2015) at $11,000 a day.

    If say the market in 2015 averages $20,000 a day, that option will be worth about $3.5 million, a huge price for DSX to pay for the privilege of fixing the vessel for two years at a cash operating loss.

    How should the stock market react to this?
    Jan 10 09:42 AM | Likes Like |Link to Comment
  • Safe Bulkers: Would Low Valuation Lead To A Management Buyout? [View article]
    By diversified shipping portfolio I mean a basket of six to 12 stocks that cover all segments of the shipping industry: Dry Cargo, Tankers, LNG & Containerships.

    Aggressive investors may also want to consider shorting the most vulnerable shipping stocks.
    Dec 31 11:18 AM | Likes Like |Link to Comment
  • Safe Bulkers: A Pending Catalyst To Improve Price Performance [View article]
    Jan,

    Your point hit the spot. The second option (renegotiate the purchase price but accept late delivery of the vessel) may not be optimal but is probably the most realistic. This is a contractual dispute after all, and the aggrieved party (SB) may have to mitigate damages. A $12 million plus windfall is still very good, but the timing of the vessel’s delivery could not be any worse.
    Dec 28 07:20 PM | Likes Like |Link to Comment
  • The Devil In The Details: Eagle Bulk Shipping's Debt Restructuring [View article]
    Gentlemen,

    Thank you very much for all your comments and feedback. I would like to wish you all Merry Christmas/Happy Holidays and Healthy & Prosperous New Year.

    Lambros
    Dec 24 08:40 PM | Likes Like |Link to Comment
  • The Devil In The Details: Eagle Bulk Shipping's Debt Restructuring [View article]
    I have recently shorted EGLE, or to be more precise I have bought at the money put options. I expect the company to burn cash at an accelerated pace in the fourth quarter, putting compliance with the amended loan covenants in serious doubt. I also expect many shipping companies, including EGLE, to make massive write-downs in the carrying value of their fleet, which should have a negative psychological effect on bargain seeking investors not versed in the industry.
    Dec 20 07:04 PM | Likes Like |Link to Comment
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