Eagle Bulk Shipping is understood to be in the process of snapping up four ultramax vessels from Nautical Bulk Holdings in what represents the first transaction involving scrubber-fitted bulk carriers.
Nasdaq-listed Eagle revealed yesterday it was set to add six modern vessels with the aid of a notes offering.
While the identity of the ships on Eagle’s radar were not disclosed at the time, further details are now emerging of what will be a significant deal for the buyer and potentially the wider market.
Today Eagle disclosed it is set to pay $122m for the six ships, which include four 2015 built ultramaxes of the SDARI-64 design and two vessels of the same specification launched in 2016.
In an SEC filing Eagle said four of the ships would arrive with scrubbers already on board, while the other two would have the exhaust gas cleaning kit fitted.
New price point
Shipbroking sources say Eagle will pay $21m each for four vessels in the Nautical Bulk fleet, which were placed on the market this summer by one of its three core investors — Solus Alternative Asset Management.
The price reflects both a debut S&P view for ships changing hands with scrubbers fitted and a rising market on the back of a rebound in freight rates this summer, TradeWinds is told.
The identity of the other two vessels in Eagle Bulk’s sights has yet to be determined.
Eagle intends to fit them with scrubbers using options already on hand.
While the conversions probably wouldn’t be ready in time for the 1 January IMO deadline, they should be completed by the end of the first quarter, market sources said.
If the deals close, Eagle will have a fleet of exactly 50 ships to its name, of which 41 will have scrubbers fitted to meet the requirements of IMO 2020.
It would also mark the second en bloc deal between a US listed shipowner and a private equity seller in the dry cargo space in 2019.
In May Star Bulk Carriers picked off 11 ships by acquiring Sophocles Zoullas-fronted Delphin Shipping, a company backed by Kelso & Co.
Like the Nautical ships, the Delphin vessels were built at China's Jiangsu New Hantong Ship Heavy Industry.
Key investor support
Today Eagle priced a notes offering undertaken to support the purchases, with its two largest shareholders - Oaktree Capital Management and GoldenTree Asset Management – investing around $70m in the new paper.
In the filing, Eagle said cash and bank debt would also come into the funding picture.
While Eagle stock came under selling pressure yesterday and closed almost 20% down, it has sprung back today was trading up 5.35% at $4.73 each at the time of writing with almost two million shares traded.
The notes pricing valued Eagle shares at $5.61, which is higher than latest estimates of its net asset value. It had been trading around $5.50 prior to the deal.
Had it carried out the deal through a conventional shares issue, its stock price likely would have taken at least a 10% hit from the prevailing $5.50 price.
Eagle will need to pay a 5% coupon on the notes, but the money is unsecured and the interest is not much higher than its typical cost of debt borrowing.
Nautical was formed in 2013 as a partnership between WL Ross & Co, Solus, Fearnley Advisors and Conti Shipping of Germany.
Ross was still in a key role at WL Ross at the time, but has since separated as a requirement of his post in the Trump administration.
TradeWinds reported at the time of the order that the newbuildings were costing $24.9m each.
Nautical was structured in a way that allowed the investors to independently sell their proportional slice of the fleet.
Solus took that step earlier this year, hiring advisory firm PJT Partners t o seek a sale of four vessels.
Eagle today also confirmed the sale of the 50,300-dwt Kestrel I (built 2004) in a deal first reported by TradeWinds earlier this week.
It will log a $1m profit on the $7.3m transaction in its third quarter accounts.
