1. all charters will be renewed at 65% of current rates 2. interest rate hedge rolls off completely in 2015 and libor starts at 2% with ceiling of 5% 3. complete OCF sweep that leaves 20M on hand, LTV to be cured at 2012 test 4. amortize debt at 40M/yr until 2018, at which point we issue a bond for amount of debt outstanding (150M) or are exempt from principal payment until 2017. 5. Pay off all debt at 2017. 6. 25 yr useful life for all vessels, everything is scrapped by 2031
The result of course, is a strong buy at this level, based on the ability to be debt free by 2017 and paying $0.36/share dividend starting 2013.
Haven't opened the model yet, but how are you going to amortize debt at $40M a year AND pay a $0.36/yr dividend? That's using the same cash for two purposes....am I right, or do I need to look at it further?
Yes please take a look at it. I thought it was too good to be true as well. Cashflow is currently about 60M/yr, the reduced charter rate at end of 2012 is more than compensated by the reduction in debt, and later further by the runoff of hedges. By the time the next set of charters expire at end of 2017, debt is already down to 230M. Cash flow is 53M/yr at this point.
I assumed no dividend in 2012 and 0.28 in 2013, 0.36 thereafter.
0.36/share of dividend costs 17.3M.
The results looked too rosy...that's why I think I missed something.
By the way edge, I passed CFA 3 and had gotten my CPA license. But I still work a lowly staff accountant job....applying to grad school now.