DryShips Inc.: Announces $150 Million Debt Commitment From ABN And Korean Export Bank

| About: DryShips Inc. (DRYS)

Summary

DryShips filed a 6-K announcing a debt commitment from ABN Amro Bank and the Korean Export Import Bank for $150 million financing of four VLGCs.

The credit facility is subject to final documentation, which will likely be completed at delivery of the first VLGC from the yards, currently scheduled for June.

The spread over LIBOR was not provided but the maturity is six years with an amortization profile of 12 years.

The credit financing commitment leaves a funding gap for the announced acquisitions that will need to be closed prior to the delivery of VLGCs during September, October, and December.

DryShips Inc (NASDAQ:DRYS) announced in a 6-K filing that it has received a firm commitment for a $150 million senior secured financing facility ("VLGC Credit Facility") from ABN Amro Bank and the Korea Export Import Bank to partly finance the four newbuild VLGCs scheduled for delivery during June, September, October, and December 2017. The terms that were disclosed are as follows:

  • 6 year maturity (tenor)
  • Approximately 12 year amortization schedule (implies per annum principal payments of $12.75 million)

Assuming the $150 million will be drawn down pro rata with the delivery of each vessel, the final documentation should be completed prior to the delivery of the first VLGC in June (probably late June). The funding for the four VLGCs is as follows:

DryShips Inc.
VLGC Funding Schedule
June September October December
VLGC 1 2 3 4
Purchase Price 334000
Option Exercise Payment 87600
Remainder Due 246400 61600 61600 61600 61600
Credit Facility Drawdown 150000 37500 37500 37500 37500
Funding Gap 96400 24100 24100 24100 24100

DRYS will need to fund an additional $72.3 million from late September to December to complete the purchases of the VLGCs. As illustrated in the table below, the $150 VLGC Credit Facility reduces the total funding gap for all of DRYS' announced acquisitions to approximately $67.4 million, a bit less than the amount that will be needed to close the last three VLGC acquisitions. DRYS therefore has sufficient capital on hand to close the acquisitions prior to the last three VLGCs and it has until September to raise some combination of debt and equity to fund the final payments for them.

DryShips
Sources/Uses
May 30th
Announced Acquisitions
VLGCs $334,000
VLCC $60,000
Suezmax $64,000
Newcastlemax $93,000
Aframax 2012 $29,000
Kamsarmax Newbuild $26,500
Kamsarmax 2x 2014 $45,500
Kamsarmax Acquisition April 27th $24,000
Subtotal $676,000
VLGC OptionExercisePmts $87,600
RemainingPayments $588,400
Cash Available May 10th $340,700
Equity Financing May 12 - 26th $14,800
VLGC Credit Facility $150,000
Cash Flow Q2 $(2,766)
Q3 $8,982
Q4 $9,315
Funding Shortfall @ May 30th $67,369

For what it is worth, here is GE's statement about raising further capital.

"Following the closing of the ABN/KEXIM loan, DryShips will still have the majority of its fleet (32 vessels) unencumbered. In dollar terms, assuming a modest 50% leverage of the market value of these assets, this would imply the ability to raise approximately $250 million (or $19.13 per share) of additional debt capital. We will now concentrate our efforts on arranging financing for these vessels. This will allow us to focus on further accretive vessel acquisitions without the need to raise further equity."

At 10:45 on May 30th, DRYS is down almost 8%. The market is clearly skeptical about the firm commitment language regarding the VLGC Credit Facility and taking a "show me" attitude. It may also be disappointed in the size of the facility. Fair enough. GE has more than earned that skepticism. I still anticipate that the VLGC Credit Facility will close in June.

Disclosure: I am/we are long DRYS.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Please note that I have traded DRYS on a regular basis, sometimes intraday round trips, for the last several weeks on the long side. I do not short stocks. I will likely aggressively trade DRYS over the next several days, increasing and decreasing my position based on the stocks performance. I expect DRYS to be volatile over the next several weeks and I view trading DRYS as extremely risky.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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