Investment bank Morgan Stanley has emerged as the buyer of 10.6m Star Bulk Carriers shares sold by private equity backer Oaktree Capital Management.
Finance sources told TradeWinds that the Oaktree block — more than a quarter of its total holding — was sold after close of trading on 24 May at between $21 and $21.50 per share, yielding total proceeds of between $223m and $228m.
It is understood that Morgan Stanley resold the entire position that night. Sources suggested it may have acted on behalf of a key client for a big chunk of the deal and then distributed the remainder to others.
The large-block sale still had not been disclosed in a public filing at TradeWinds’ deadline.
A Morgan Stanley representative did not respond to a request for comment by TradeWinds’ deadline. Star Bulk management declined comment.
Oaktree’s sale has been tied in part to sinking the share price not just of Star Bulk, but those of several dry bulk peers, when open trading resumed the following day.
"I think it caught some people by surprise that Oaktree was making a sale that large this early in the cycle," Jefferies equity analyst Randy Giveans said at the time.
Finance sources said it may well have been as much of a surprise to Star Bulk management as to the market.
Long-time backer
Still, for all the significance of a $220m sale of the stock, it is also worth considering what the transaction likely is not: either a sign that Oaktree is about to move quickly out of Star Bulk, or that it is calling the top of the market in the current dry bulk bull run.
Oaktree has been building its position in Star Bulk since 2014 — virtually a lifetime for a private-equity firm to be invested in a shipowner.
At that time, Star Bulk merged with Oceanbulk entities that were joint ventures between Oaktree and Star Bulk chief executive Petros Pappas.
Moreover, the California-based finance giant held a whopping 39m shares — 39% — in Star Bulk before the divestment, and retains 28.7m after it, worth about $575m at the recent share price.
This remains a small slice of Oaktree’s overall portfolio, as it had $348bn in assets under management as of 31 December 2020.
To give some perspective, because Oaktree has continued to add to the position in the last couple of years, the investor held 31.6m shares (34%) of Star Bulk in February 2019 — not so far above its current reduced holding.
Rising market
“Considering the size of their position and the length of time they’ve been supporting Star [Bulk], I can’t imagine the market being too shocked that Oaktree reduced its position,” one public company executive said.
There is also the context of “Prexit” — the name some industry insiders have assigned to private equity's move out of their shipping investments in the past couple of years.
This has been possible since the end of 2020 because dry bulk shares have firmed so markedly, allowing funds to sell into the strength of the rising market.
