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Genco Shipping & Trading Ltd. Message Board

  • end2war end2war May 8, 2012 3:40 PM Flag

    When can we say that the bad news is "priced in"?

    One thing is clear, the maritime stocks are hurting and the bulkers most of all. Another thing is clear, the reasons for the price declines are that the overall supply of new built ships has exceeded the overall growth in demand for ships, producing an excess of ships, and competition among ship owners for jobs, resulting in lower rates and reduced profits, plus ship values have fallen, so there are a lot of overpriced ships on the books, impairment charges and weak earnings reports...a perfect storm yes, but who better equipped to ride out the storm than the shipping industry that moves 90% of all freight...?

    And the worst of what we have seen in earnings, rates, oversupply, under usage, slow sailing, scrapping, and over all disruption, has just happened to bulkers in the first quarter, as every Bulk shipper in the world has been hit, more or less, with the same negative factors...and they have all exhaustively reported all about it... so, is the news out and has it been priced in yet? Has all the selling finished?

    Every analyst under the sun and every maritime publication has discussed these considerations to utter exhaustion... They know exactly how many bulk ships are in the worldwide fleet (about 8900) and how many are being delivered in 2012 (take a guess, lol) and they have projections for how long it will take to absorb the new ships, when the rates will return to "normal", and how many building yards will now need to switch to scrapping yards, how many ships will get scrapped, and everything else except, perhaps, what will be the actual world demand for shipments as their are various growth stories that could play out if China does this or that...

    As the last quarter proceeded to drop the BDI to a 26 year low, GNK's PPS was rising... now that the BDI is rising back, GNK's PPS is falling to new lows... anyone detect that this is out of sync? Was this the final plunge? Companies like GNK have an awful lot of earning power explosion ready to blow the second the rates achieve some solid improvements -- wait a minute, they did have quite a big jump up from February -- has the required movement already happened?

    Frankly, I think the big players have it all figured out, and the only uncertainty that really remains is how long the situation will continue that Shippers have little pricing control and how high will shipping rates rise once shippers get back into control? So are we jocking for position? How long will GNK stay under $5? under $7.50? Under $10?... I would suggest, not long...

    With all that bad news having been digested, why should bulkers still go down?... so, when is the bad news "priced in"? and when does the "recovery" begin?

    After it begins you will know but it is something that will be clear in hindsight... For those with some vision, there may be some good buys out there... but do your own diligence and save some money in case there are further

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    • You're correct on the LTV issue.

      The difficulty facing the lenders, of course, is that if they pull the plug on the company they - the lenders - will be stuck with loan write downs or with the unpalatable necessity of unloading boats in a market that is saturated.

      Presumably they will attempt to recover some of their principal, boost interest charges to compensate for their increased risk, but try to keep the company operational as long as possible so as to recover as much of their cash as possible. The recent deal between OSG and its lenders might be the "new normal".

      If rates don't tick upward this year, and based on FFA it seems unlikely that they will, the "gig" will be up for the shippers such as GNK whose balance sheets are overstated. Significant impairment charges could trigger a cascade of loan covenant consequences.

      The lenders might be agnostic as to whether the company raises additional cash from equity issuance or a private placement debt issuance as long as they, the banking syndicate, are senior in a restructure.

      Either way, the current common holders are going to get hosed. They might not lose everything, but if those naive waifs who have been salivating over the incredibly low price-to-book don't start looking beyond the BDI to the bigger picture they're in for a very rude reality check.

    • LOL1 Recommending reading Stopford's book is funny. This nut reads articles about box ships and tries to suggest a connection to GNK.

      IF HE READ ANYTHING about the industry BEFORE he invested, he wouldn't be IN this stock and LOSING HARD at this time and begging for the stock to go up in his every post.

    • The only problem there is that the ships are worth less than the outstanding debt.
      My view is that they will force them to raise equity, just like they did in Q1 and like they have done on excel.

    • Yeah. My bet would be that the bank syndicate agrees to roll a part of the loan - maybe 80% - for a 100 basis increase and requires the company to raise the rest through other means.

      Which will likely mean selling a few boats, either outright or on a sale leaseback arrangement.

    • To my point - thank you!
      The stock is not going BK tomorrow... but it does not deserve to be at 4.

      If you guys are so hungry to get in shipping... then buy a low debt vehicle with lots and lots of cash...

      DSX is one... but the guy does not like risk...

    • At a cost my friend... And when that time comes... you think the stock will be at 9 bucks???
      or 7 or 6 or even 4???

      They will raise as money as they can via equity.

      you guys should get ready because it is coming...

      If peter G is smart he will take out his ATM card and hit the machine...

      Before he finds out that it runs out of money.

    • Are you following the entire discussion?

      The eternal optimists insist that GNK's earnings losses are irrelevant because operating cash is sufficent to pay interest charges.

      Which is true. But it is only part of the story. The elephant in the room is debt repayment. And for that, GNK's cashflow is well short of what it will need.

      Yes, the banks might agree to change the repayment terms. Yes, they have done so in the past. And yes, they have recently done so for other bulkers.

      And what has been the result? EXM is selling for 1.48; EGLE is selling for 1.20.

      And the optimists think GNK will be a triple? Nonsense. The stock will be luck to hold 4.

      Again, read the entire thread. I don't believe GNK will go BK. But it has a tough road ahead. What happened with EXM and EGLE is as likely as not the near term future for GNK. Forget about the triple. It isn't going to happen.

    • Here is what I mean by saying that the market knows the situation and thus, the problems are, or should be, priced in... the raw numbers... so, again, the issue is when does the negative get priced in... even if there are a few bad quarters left to this problem, when does the market look through the valley and see what is coming... after all, winter lasts for only a few months, then the cycle brings on a thaw...

    • Well you are right... have not though about it but I I am making money on GNK by not buying it...
      I am saving my money.

      Again you are right about the $8M negative operational cash flow, but that was based on a debt repayment of 19M in Q1.... In Q2 that number is going to be closer to 55 million and it will stay at that level going forward.

      So... the Q2 projection is not only for Q2... but for the balance of 2012.

      Remember -> If the freight market is below 22,000 per day then GNK is burning cash....

    • egle done it 7 times
      exm too

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