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Global Ship Lease, Inc. Message Board

  • upwardmo upwardmo Aug 15, 2011 11:21 AM Flag

    who was that last caller?

    Missed the name. He read Ian the riot act regarding dividends and general transparency, and I'm glad he did so. I hope Ian takes the caller's words and tone to heart. We need our dividends sooner rather than later, or this stock will continue to languish.

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    • While I thought there could have been some criticisms leveled at the company, I was not impressed with this guy's rant. What difference would it make for Michael Gross to be on the call? The shelf was to get us over the LTV test and was not needed. We don't need any additional expensive financing. And, we don't need dilutive equity done at a poor stock price.

      There was a case to be made that last quarter they could have restored the dividend, let the stock price soar, then do an offering. However, we must understand that gamble knowing that even though the price might have been up, could it support a whole, significant offering? Maybe not.

      The way I read the Zim ships is that financing is available, but at an obnoxious interest rate with unacceptable covenants. Ian tried to sell the new position as "no purchase obligations," but basically we pissed away the option money. Water under the bridge now.

      They should have given more guidance on the dividend considering that is what the shareholders really want to hear. They could say that they are really interested in getting the next 1/2 point of better interest and having a buffer on the 1/2 point we already got. They could say something to the effect that if the Nov valuation test goes as planned, and there isn't either an unexpected downturn in the container market (kind of goes hand in hand with meeting the valuations anyway), or that there isn't some unique financing opportunity to expand the fleet, then dividends will be restored in some form. This is what I believe the case to be anyway. If they can't commit to something like that, then they just need to come out and say that they might not be a dividend company anymore and get on with it. Again, I doubt that scenario.

      The good news is that Michael Gross owns a ton of GSL and hasn't sold any. The other good news is that GSL is going to be just fine, just probably not immediately spectacular.

      • 1 Reply to bobgrant10
      • I'm going to slightly disagree with two points. While I used to think the shelf was for the LTV as well, I now believe it is to ultimately grow the company. However, a side effect will be to lower LTV, because half of any capital raise must go towards amortizing debt if my memory of the credit facility ammendment serves me correctly. Second, as Ian said, I don't think the financing constraints were with the bank side but with the cash payment side. If we think about where we get the money for a cash payment, it has to come from one of four places:

        1. Equity offering
        2. Preferred offering
        3. Subordinated debt offering
        4. Seller financing

        Choice #1 is (hopefully) out of the question given implied cost of capital in the stock. #2, I'm not sure about. It appears that others (Seaspan) have done preferreds, but my guess is the cost of capital is likely too high here. #3, well -- debt markets are closed. #4, looks like that didn't materialize, or wasn't on great terms.

        I would not be surprised if Ian had the banks ready to go on a secured, 65% LTV loan with LIBOR + 300bps margin and 6-7% amortization rate. But if the cash payment side was not financed correctly, then shareholders would be left with nothing after all-in cost-of-capital and it wouldn't be worth doing...which seems to be the case.

    • I don't know either, but he is an idiot. Do you realize how offensive it is to suggest that the CEO of the firm isn't able to answer your questions about the firm, that we need the chairman of the board on the call too? In addition to being insulting, it's also a highly irregular suggestion IMO.

      And I think the message of "transparency" is misguided as well. If anything, an argument could be made on consistency, that when they start signaling about a resumption of dividends, they need to go through with it or risk the wrath of these hot-money guys.

      But the latest message on divs sounds more measured than in quarters past... it doesn't sound to me like they're raring to go on a divy resumption, at least not until they get a second datapoint on LTV during the next test in a few months. That's my read, anyway.

      • 2 Replies to sfi_watcher
      • Gross is non-exec chair. technically he has no place on call. either disgruntled div hound or short.

        on last point, i think reinstatement only to be cashiered in unexpected Nov swoon would be worse than current plan. remember, they want 40% equity for Zim ships, not 25%. paying close attention imo to balance sheet, as Ian said x X, so they Can resume w/o issues. trying not to drink what i want to hear, but i was ok with what i heard.

      • The caller may have been impertinent, but he accurately reflected the impatience and frustration of many investors in this stock, myself included. Vague assertions of resumption of dividends at some point in the future have grown wearisome. The company could certainly resume at least a modest dividend, with assurances of regular in the future, while preserving its financial security, imo.

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