I think Q1 shows management is just trying to delever. It would be great to see some share repurchase, even a token amount, but debt paydown seems to be the name of the game. We should expect to see this continue the rest of the year and possibly into 2017. Considering all of the squealing I have read over the years about how NNA has too much debt, I can hear the crickets chirping now that they are paying it down in meaningful amounts.
Based on the expense structure and current charters, I come up with a preliminary estimate of .13 EPS in Q2. We are only halfway through the quarter, so the path of spot rates for the rest of the quarter will have a material impact on this estimate as time passes.
It looks to me like NNA is in full debt repayment mode. I would very much like to see them buy back some shares here, but I'd guess that we will see gross debt down by $100MM or more by the end of the year from the 3/31 number with cash balance at the same level or higher.
Have not heard the call yet, but ultimately anything she says does not matter. When is the proxy vote? That is when you could see some action.
You got me on why they don't pull all the knobs out on trying to rev up the share price on NNA. If it were me, I would be boosting the dividend, aggressively buying back stock, and liquidating a few more ships to pay down debt faster and make people happy. Add in some independent directors and you could sell off half of the NM stake in NNA at 3.50 or 4.00 and retain the rest as it appreciates.
If the activist gambit to get directors who are truly independent is successful, it will go a long way. Other ways to resolve this would be a sale of NM's interest in NNA (don't hold your breath) or for NM to give up the ghost via a bankruptcy/prepack/distressed exchange (increasingly more likely with every passing month).
The funny thing is that I am wondering what actual material aid NNA could even give NM. The loan is out after the lawsuit. They could try selling assets to NNA, but anything too off-color would likely result in another suit. I suppose they could bump the management agreement costs, but again I think anything funny courts a lawsuit. The Moody's release implies they don't see a big dividend bump, so that is presumably out, and in any case the bond indenture prohibits much more than a token amount.
There is an article I can't read on tradewinds indicating that the investor who sued over the loan is now pushing for greater NNA director independence. If that happens, the value disconnect here may evaporate quickly. For heaven's sake, they could sell the whole fleet and distribute the NAP shares to shareholders and the proceeds would be a double from the current stock price.
I thought about it overnight and decided to blow out my NAP shares. I really think it will go to 15, but the big spike yesterday on no news against a background of a shaky market made me take the money and run. NAP is also around my estimate of NAV, something I can say for no other tanker equity. If it gets clobbered again this summer I will probably buy again.
In the meantime, I don't understand the NNA selloff. Still way below NAV, solid earnings, and the lawsuit clearly drew the lines between NNA and NM.
The transcript is on Seeking Alpha. Pretty uneventful. I get the impression that they are just hanging onto cash until market conditions stabilize and it becomes clear that MLPs/shipping are not completely cut off from access to capital.
I could see them selling the other two, smaller chemical tankers. They don't quite fit with the rest of the fleet. Anyone know what they might be worth?
I am guessing they will be a snoozefest given the way NAP just ticks along with its long term charters. I wonder if there will be any real analyst questions about, say, the use of the cash NAP continues to pile up?
There are lots of ways to deal with a liquidity shortfall. The bigger deal is Vale walking away from the NSAL contract. That was the main way I saw NM dealing with the 2019 maturity. If the ability to significantly boost NSAL's EBITDA in time to monetize it and pay off the 2019 bonds is in jeopardy (which Vale defaulting would do), that means NM is very dependant on a short term rebound in dry bulk well past the recent recovery off the floor. Not looking great, guys.
OTOH, for NNA's share price a bankruptcy would probably be great. NM would be highly likely to do a prepack bankruptcy or avoid it via a massive dilutive event. Either one would remove more of the questions around contagion.
Actually, after years of stupidity I am finally seeing what I have been hoping for:
- yards going bust
- nobody ordering ships
- high demolition
If you it is so huge, then we should probably be digging through the couch cushions to buy up dry bulk, iron ore, etc. shares.