Greek owner Euroseas has bought four feederships as it refinanced debt to free cash.
The Nasdaq-listed company said it had agreed to acquire four vessels from the controlling Pittas family for a price that includes a cash payment of $15m and an issue of about 22.5m shares to the sellers.
This equates to $13.5m at the current level of $0.60 per share.
These shares represent approximately 64.3% of the company.
The ships - the 1,700-teu EM Hydra and EM Spetses (built in 2005 and 2007), the 3,100-teu EM Kea (built 2007) and the 2,008-teu Diamantis P (built 1998) - are owned by affiliates of the Pittas family, controlled by CEO Aristides Pittas.
The deal lifts the fleet to 15 ships, all but one of which are feeders.
It will use bank debt to finance the cash part of the transaction, which will repay existing borrowings on the ships.
This means the sellers will only receive the Euroseas stock.
The company also said it had refinanced two of its vessels with a simultaneous interest rate reduction for all other existing loans.
This has freed about $8m in cash, which, together with $3.7m of available cash, will be used to redeem $11.7m - or 60% - of its series B preferred shares.
All of Euroseas’ existing vessels are now financed by the same bank, which as part of the arrangement agreed to reduce the margin of the overall loan facility by 0.5%, it said.
The series B redemption has seen the dividend rate cut to 8% for the remaining shares until next January.
The preferred shares have an aggregate value of $19.7m and since January have carried an annual dividend of 12%, which had been set to increase to 14% in January 2021.
Money saved on interest
The company said: "Euroseas believes that the combined effect of these transactions will be to reduce its interest and preferred dividend expenses by approximately $1.4m per year as well as its overall leverage of combined debt and preferred equity."
Pittas called the moves "transformative transactions."
He added it "underscores the belief of the main shareholders of Euroseas (including myself and the broader Pittas family) in the prospects of the sector, in general, and in Euroseas, in particular, as the main publicly listed consolidation platform for other feeder containership fleets as well.
"Thus, we were happy to contribute the vessels in exchange only for shares and replacement of existing debt of the vessels by debt arranged by Euroseas.”
He said: “Following these transactions, Euroseas becomes a larger, better capitalised company with a younger fleet. We remain optimistic about the prospects of the feeder containership markets due to favorable supply developments that would allow trade demand growth to get translated to better market rates, especially, when trade uncertainties related to the US-China trade tensions are resolved.”
CFO Tasos Aslidis added: “It should be also noted that the redemption of the preferred equity, the reduction of its dividend rate until January 2021 and the reduction of our main bank’s margin along with the increase of the number of vessels in our fleet result in shaving about $450 per vessel per day from our daily cash flow breakeven level, which is further reduced by about another $150 per vessel per day as our general and administrative expenses are spread over a larger number of vessels as well.“
