MPC Container Ships (MPCC) has prevented a dilution of earnings for investors by buying back convertible warrants.
The Oslo-listed German feeder vessel owner said it had agreed a deal with affiliate MPC Capital to repurchase and cancel 3.7m warrants carrying the right to buy the same amount of MPCC shares at $1.89 each.
The company spent $3.55m on the warrants, a 3% discount to their intrinsic value based on the MPCC share price over the previous 10 days.
The shareholding of MPC Capital in MPCC remains unchanged.
"By repurchasing and cancelling these warrants, no new shares will be issued," MPCC said.
"The repurchase price is expected to be over-compensated in less than two years by avoiding earnings dilution for existing shareholders."
Fearnley Securities, which has a "buy" rating on the stock, said the deal cleans up MPCC's capital structure, "in addition to being accretive in terms of buying at a discount".
A further 1.9m warrants remained outstanding at the end of the second quarter, the investment bank added.
The stock was trading down nearly 2% at NOK 24.95 ($2.87) in Oslo on Monday morning.
Fearnleys assessed the net asset value of MPCC at NOK 25, although it said recent rises in secondhand values and continued upward pressure on charter rates leave some upside.
Record volumes in US
"Further, a strong charter market also leaves ... upside to our (and consensus) estimates for both 2022 and 2023," the investment bank said.
The Shanghai Container Freight Index rose 3% in the week ending 3 September.
The positive rate development continues to be driven by robust demand and a high level of fleet inefficiencies, Fearnleys added.
Los Angeles and Long Beach ports are preparing for volumes to surpass 20m teu this year, about 2.5m teu higher than the previous record, despite a record number of vessels tied up for prolonged times and increased truck turnaround times.
The charter market is also still rising, with panamaxes now just shy of $100,000 per day for 12-month charters, Fearnleys said.
Similarly, 2,700-teu feeder ships are at $75,000 per day, seven times the average of 2020.
"There continue to be several extreme short-term charters concluded and the duration on these deals continue to lengthen," analysts Peder Nicolai Jarlsby, Erik Gabriel Hovi and Ulrik Mannhart added.
They expect this market to hold up into 2022, with the potential for further extensions through extended supply disruptions.
