Why investors should look into DryShips’ financing commitments
A must-read overview of DryShips' 2nd quarter 2014 earnings (Part 8 of 8)
DRYS financing
Testament to DryShips’ (DRYS) strong and long-lasting relationship with commercial lenders and a clear sign of the support the company enjoys from the banking industry, DRYS has received firm commitments for a total of up to $520 million from ABN AMRO and Nordea Bank.
This is the first major milestone towards the refinancing of the company’s 5% convertible notes maturing in December. The company continues to pursue various alternatives for the remainder of the balance.
Subsequently, on July 18, 2014, the company signed a firm commitment letter from Nordea Bank for an up-to-$170-million senior secured credit facility to finance nine dry bulk vessels. Nordea Bank has committed to fully underwriting this facility, which is expected to have a five-year term and which bears interest at LIBOR plus a margin.
Six out of the nine vessels are currently mortgaged under the company’s $325 million senior credit facility, which had a balance of $58.1 million as of July 31, 2014. The remaining three vessels are currently debt-free. The availability of this facility is subject to final documentation and certain conditions precedent.
On July 16, 2014, the company received a firm commitment letter for an up-to-$350-million secured bridge loan facility to partially refinance its 5% convertible bond maturing on December 1, 2014. ABN AMRO Bank is expected to be the lead arranger and commit $200 million in this facility.
The facility is subject to definitive documentation. DryShips said that it expected it will be secured by Ocean Rig shares owned by the company, will contain certain conditions precedent, will mature 12 months from the drawdown date or such period as may be extended by the lenders for up to 12 months, and will be subject to mandatory prepayment in certain events.
Key stocks and ETFs
The company is part of the Guggenheim Shipping ETF (SEA), which also tracks other shipping companies, like Navios Maritime Holdings Inc. (NM), Safe Bulkers (SB), Navios Maritime Partners (NMM), and Star Bulk Carriers Corp. (SBLK).
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