SB just announced a preferred share buyback plan. Great for me since I hold the C shares. Hopefully this is the start of a trend and NM will announce a similar program. Here's the announcement:
ATHENS, GREECE--(Marketwired - Nov 24, 2015) - Safe Bulkers, Inc. (the "Company") (NYSE: SB), an international provider of marine drybulk transportation services, announced today that it has authorized a share repurchase program in the aggregate of up to $20 million under which it may from time to time in the future purchase: (i) 8.00% Series B Cumulative Redeemable Perpetual Preferred Shares, $0.01 par value per share, liquidation preference $25.00 per share (the "Series B Preferred Shares"); (ii) 8.00% Series C Cumulative Redeemable Perpetual Preferred Shares, $0.01 par value per share, liquidation preference $25.00 per share (the "Series C Preferred Shares"); and (iii) 8.00% Series D Cumulative Redeemable Perpetual Preferred Shares, $0.01 par value per share, liquidation preference $25.00 per share (the "Series D Preferred Shares").
Isn't it funny how the news always gets leaked?
Right before the close there was a huge 20K share buy in the C series. And a similar buying spike in the D series. Then after the close a share repurchase plan is announced. I guess it's good for me since tomorrow I bet the C shares trade above my $8 buy price, but someone is still cheating the system.
One wonders if the company will follow through and buy or if it is just a ploy to boost the share price? Let's hope they do. They aren't going to find a 20%+ return anywhere else.
The Analyst also suggested that. Angeliki gave a vague response to the question though. But either buying back bonds or preferred shares seems a better move that buying the common. Buying the preferred gives a 25% return. Buying back bonds would seem to be better for balance sheet purposes though.
The CC is on Seeking Alpha. Buying more ships at this point seems pointless. Instead, as one of the Analysts suggested, they should buy back preferred shares. Where else are they going to get a 25% return?
Yep, nothing is good. Ultimately everything turns on how long shipping remains in a slump. If its for more than 3 years the company may not survive.
One has to ask oneself if this is the end of the world or if it is another opportunity as in early 2009?
Buying stocks is always a gamble. I bought the preferred shares @$8 and placed my bets. I'm hoping to see bargain hunters come in Jan. so that I can lock in some profits. But I do plan to hold onto 3/4 of my shares unless things get substantially worse. All a holder can do is continue to watch BDI and hope.
One can not believe a word ANY CEO speaks. They are all just lying politicians. Instead you need to only look at the numbers and evaluate them for yourself.
By looking at the numbers I have predicted both the cut in NMM and now the complete elimination for NM.
The question going forward is how long will the downturn in shipping last?
No one knows - not I - not Angeliki. If it lasts over 3 years one has to start to fear for the survival of NM. If it last but a year or two then all those who bought today @$1.20 are going to be rich. Buying any stock is gambling. One is always gambling on a future no one knows using past scenarios that may or may not repeat.
NM just cut their distribution to ZERO. That means they have 2X coverage for the preferred shares now. Let's just hope that the current shipping market downturn doesn't last over 3 years. If so, we should be fine.
The energy patch is in the same boat as shipping with current prices at multi-year lows. NM and SB both cut their dividends to zero to save cash. You are right, KMI should do the same. In bad times a company should focus on survival.
It already came to NMM. They cut the distribution in half.
But if NMM falls to under $2, as NM has, then the best use of capital would be to suspend the distribution and buy back shares.
Looks as if NM can make it for at least 3 more years in the current market environment. Let's just hope that it doesn't last that long. If so, even my preferred shares are sunk.
As I predicted, they have cut the distribution to zero. Sure that hurts for now, but its the right thing to do for the long haul.
First I like it since as a preffered holder they now have 2X coverage as can be seen on page 8. But that also means that they can buy back common shares to prevent them from breaking the $1 level. To me that means that anything below a buck is a screaming buy. Let's just hope that Angeliki does buyback shares and that she isn't just making another empty promise.
Even if they don't buyback stock, at least they will improve their burn rate. In nine months they burned through $75M in cash. They can't keep that up. At that rate in 3 years they are sunk, so let's hope that they also come up with some ways to reduce costs.
Net Debt/Book still looks great at 53%. Although we know that in the current market environment that's a fantasy. However, hopefully the banks will continue to pretend otherwise. After all we are all expecting an eventual recovery in shipping unless it is the end of the world.
While what you say is true, one has to consider what all the parties are likely to do. The ship builders almost have to allow SB to play the delay game. If they press SB and force them into bankruptcy they may get nothing. Plus they may alienate their other customers. They may therefore consider it best just to wait it out now and support their current customers so that when the worm turns they will continue to do business with them.
The banks are in the same boat. Even if SB doesn't meet its covenants, they may not be able to press the issue. They really don't want to take possession of ships which they will have to dump into a market where there currently are no buyers. The ships are more valuable in the hands of SB than in theirs. Think of how bankers are still working with Box Ships for example. But then; there is DryShips and the moves it has made where management has worked with the banks while castrating investors.
How can you not understand my logic?
If as you say; "they are burning through cash," then they will eventually go bankrupt as I said.
And I never said that the preferreds were 100% safe - NEVER.
All I did say is that the preferreds are much safer than the common. If the company survives then the dividends on the preferreds will accumulate even if they are temporarily cut; then once the company recovers they will get paid.
Meanwhile if the common is cut - it is cut. Plus, as you mention, there is also the threat of dilution.
No, I mean that if they eliminate the command dividend - which I expect they will - that they will be able to cover the preferred 2X over. Remember that that have to pay the preferred dividend now or later unless they go bankrupt.
They do not cover the NM common dividend although they do provide 2X coverage for the preferred. Big cut coming Monday.
The $8 figure is a fantasy in current market conditions. There is no way their assets are worth that.
The problem is their cash burn right now. They could easily burn through all their cash in 3-4 years.
Lots of big questions:
First will they be forced to sell stock even though they don't want to at such low prices?
Second do they have the resources to wait out the current downturn for what might be 5 years?
Scarry environment even though I bought both the SB and NM preferred shares when they hit $8.
I bought AHHAP. Bought it for 50 cents and sold it for $14. I don't mind rolling the dice.
Now I also bought a Chinese scam stock for $1 that is now worth ZERO!
Go read the SB earnings report. Everyone is expecting NM's report to be just as lousy Monday. You say no news; but as far as the industry there has been a lot. What about Box Ships getting delisted? And who hasn't been watching as BDI craters?
The parent - NM has a better book value - $10.26. And buying NM is buying NMM since they own a third. Plus one gets NNA which is on a tear.
But NM is in trouble and if shipping stays as it is for 4 or 5 years it's hard to see how they'll make it. But if one believes that shipping is a cyclical industry and that things will get better in a year or two it deserves a look.
In December one may be able to pick up some shares under $1 due to tax loss selling, forced selling, and window dressing. Could be a 10 bagger over time - or you could lose everything.
I loaded up on the NM-H preferred shares in my retirement account when they hit $8. I'm also thinking of making a sub $1 play on NM in my private trading account if just for a Jan play.