Star Bulk Carriers and ER Capital have walked away from a potential deal involving four capesize bulkers, following a dramatic fall in asset values during the past eight months.
The agreement will save Star Bulk from having to pay around $20m above the market value of the ships.
Petros Pappas, chief executive of Star Bulk, told TradeWinds: "This decision was taken simply because the call option prices we had on the vessels were higher than the current market prices."
Star Bulk was holding options to purchase the four capes from ER Capital at a price of $28.9m each, payable in cash and shares.
The options were the second stage of a deal Star Bulk signed in August 2018 to buy two 2010-built capesizes and a supramax from the German owner.
ER Capital also had put options that could be exercised if Star Bulk opted not to take the extra vessels.
The companies have mutually agreed to waive their respective options on the 180,000-dwt ER America, ER Bayonne, ER Borneo and ER Buenos Aires (all built 2010)
VesselsValue.com estimates the current value of the four capesizes at $95.1m en bloc, much less than the aggregate call option pricing of $115.4m.
Star Bulk said today it has zero remaining equity capital expenditure due either for its vessel acquisitions or for its scrubber programme as a result of the agreement with ER Capital.
"A lot has changed in the last six to eight months. I understand why Star Bulk cancelled the options," Randy Giveans, equity analyst for Jefferies, told TradeWinds.
Giveans suggested that Star Bulk would rather use its cash for share repurchases and scrubbers.
"Star Bulk would rather repurchase shares than issue shares for ships at this low equity price," he said.
Neither would Star Bulk wish to add capesize exposure in this current market "due to Vale uncertainty", Giveans added.
