Star Bulk Carriers Corp may expand its fleet to almost 120 ships after inking its third fleet deal of the year.
The Petros Pappas-led company has entered into a deal with ER Capital Holding to acquire three dry bulk vessels in 2018 with the option for another four in 2019.
"We are excited to expand our footprint in the capesize segment, especially in a period that the dry bulk market is tightening," chief executive Pappas said.
The first three ships are 180,000-dwt ER Bourgogne and ER Brandenburg and 55,500-dwt ER Brighton (all built 2010).
The four remaining vessels are 180,000-dwt ER America, ER Bayonne, ER Borneo and ER Buenos Aires (all built 2010).
US-listed Star Bulk said it will take over any chartering deals assigned to these vessels.
As with Star's previous swoops for Songa Bulk and Augustea, the Greek owner is using a combination of cash and shares to support the move.
The first three vessels will be acquired for about 1.34 million common shares of Star Bulk and $41.7m in cash.
The number of shares to be issued is subject to adjustments for the company’s cash, debt and remaining capital expenditures as of one business day before delivery date of each ship.
The cash for the vessels will come through a new five-year, $41m term loan from a major European commercial bank.
ER will own about 1.45% of Star Bulk common shares after these three ships are acquired.
For the remaining four vessels, ER has given four call options to Star Bulk for an aggregate exercise price of $115.4m or $28.85 million per ship, which it can take on 1 April 2019.
Star Bulk has granted four put options to ER with total exercise price of $105.4m or $26.4m per vessel, exercisable by ER from 2 to 4 April 2019 to April 4, 2019 in case Star Bulk does not exercise the call options.
The number of shares issued to ER, if any, will be determined by Star Bulk's net asset value as of 31 March 2019.
A 'favourable' transaction
Deutsche Bank analyst Amit Mehrotra looks upon the ship acquisitions "favourably" as Star Bulk takes on operating leverage at the right point in the cycle while prudently managing financial risks.
"In this sense today’s announcement underscores why Star Bulk remains our top dry bulk pick," he wrote in a note to clients.
