Oaktree Capital has snapped up another batch of Eagle Bulk Shipping shares to continue a flurry of investment activity in the shipowner by its largest shareholder.
Oaktree took $45.5m of Eagle’s new convertible bond launched last week to fund the purchase of six ultramaxes and has been a regular buyer of the stock for several months.
This week, with analysts upgrading their profit forecasts after the $122m acquisition, Oaktree has added additional Eagle shares.
It had bought an extra $2.96m of Eagle stock it two separate purchases, according to an SEC filing.
It takes Oaktree’s overall holding in Eagle to 28,794,085 shares, worth around $130m at the last purchase price.
Growing fleet in 'sweet spot'
Eagle has now bought 20 ultramaxes and sold 14 older ships during the past three years.
“Together, we believe these S&P transactions have transformed our fleet makeup and significantly improved our earnings generation capability,” said chief executive Gary Vogel on an earnings call this week.
“At the same time, we’ve managed to keep the average age of the fleet essentially flat over the past three years, between eight and nine years of age.
“We believe this is a sweet spot in terms of fleet average age, balancing, operating capacity and efficiencies with maximizing yield due to the lower amount of invested capital as compared with all newer ships.”
As TradeWinds has reported, four of the ships Eagle is buying are from private equity seller Nautical Bulk Holdings.
All six of the new vessels will have scrubbers when the new emissions rules arrive at the start of next year.
“We believe the price we were able to achieve is attractive relative to recent comps and that timing is ideal given current rate developments and the impending onset of IMO 2020,” Vogal said.
“The acquisitions will meaningfully improve our fleet makeup and operating results on a pro forma basis as well as provide further capacity for growth.”
Profitable purchase
Following the acquisition of the latest six ultramaxes, multiple analysts ratcheted up profit forecasts for Eagle.
Analysts at DNB Markets, led by Nicolay Dyvik, now project a profit of $25m for Eagle in 2020, edging up to $26m in 2021.
Both figures are a $10m bump on the bank’s previous projections.
Jon Chappell of Evercore ISI said the transaction “checked a lot of important boxes” in the ongoing evolution of the shipowner.
“The larger carrying capacity of more modern ultramaxes and associated longer-haul capabilities add to operational flexibility,” he said.
“The six ships to be acquired as part of the recent transaction, which should all be delivered by yearend, will not only add more operational upside, but will also lower the average operating costs and G&A/day of the fleet.”
Following the deal, Chappell raised his profit forecast for the company to $31.4m in 2020.
Frode Morkedal of Clarksons Platou Securities said the larger and more modern vessels would prove more beneficial in the upcoming low sulphur fuel oil market.
He forecasts a $61m profit for Eagle in 2020, followed by a $51m gain in 2021, with the company tipped to replace eight further vessels aged 15 years or more which remain the fleet today.
