Star Bulk Carriers — one of the world’s biggest shipping companies — has announced a second big share buyback from its largest shareholder in a little more than a month.
Howard Marks-led private equity giant Oaktree Capital Management sold back 10m of its common shares in the company at $19.5 apiece. The stock closed at $18.55 in New York trading on Monday.
Combined with a buyback announced last month, Oaktree raised a total of $380m from Star Bulk buybacks that have reduced its stake in the company from about 25% to just 7.2%.
At the peak of its Star Bulk ownership back in 2015, Oaktree owned 58% of the company.
Oaktree has been one of the most patient private equity investors in shipping, backing both Star Bulk and US-listed dry bulk peer Eagle Bulk Shipping for nearly a decade.
Eagle Bulk bought back Oaktree’s entire 28% stake back in June, in a deal worth $219m.
The latest 10m share transaction between Star Bulk and Oaktree will be carried out on 1 December.
Following its completion, Oaktree will be entitled to nominate just one director on Star Bulk’s board.
Even after the latest share sale, Oaktree remains among Star Bulk’s biggest single shareholders.
Star Bulk said that it will finance the latest share buyback through new debt financing, which it “intends to repay with proceeds mostly from future vessel sales”.
The company’s dividend policy will not be affected by the deal.
“We believe that the share repurchase will be accretive to our future dividends per share,” Star Bulk said, adding that it was approved unanimously by its board of directors.
The price reflects a 10% discount to Fearnley Securities’ estimates of a $21.80 per share net asset value (NAV).
It is also a 5% premium to Star Bulk’s closing price on Monday.
The previous 10m share buyback from Oaktree was done at $18.50 per share, which back then reflected a 15% discount to Fearnley’s NAV estimate, the investment bank said.
The owner has been trading at 90% of NAV on average for the last five years.
Fearnley views the acquisition price as pretty much spot-on in terms of historical steel pricing for the share.
The investment bank sees a clear rationale for the deal, which will improve earnings per share.
Fearnley calculates that the net loan-to-value will go from 28% ahead of both share acquisitions to 41% afterwards, with further reductions possible from likely ship sales.
