“Patient money” is a term sometimes applied to private equity investors who can afford to let their investment ride for several years or more without making an exit to recoup returns.
The term continues to apply to one of shipping’s largest private investors, California-based Oaktree Capital Management. It has been increasing its stake in public dry bulk owners this year while maintaining large bets on product tankers and chemical carriers.
As TradeWinds has reported, Oaktree began to increase its already large stake in Connecticut dry owner Eagle Bulk Shipping in the fourth quarter of 2018 and has continued throughout this summer.
Bulk buy
Oaktree’s latest buy of 1.2 million common shares this month brought its total stake in New York-listed Eagle Bulk to more than 29.3 million, or 40.1% of the company.
Less noticed has been Oaktree’s continued buys in its other major dry investment, Star Bulk Carriers of Greece.
Purchases of 1.62 million shares reported in March and 1.63 million shares reported in June brought Oaktree’s overall total in New York-listed Star Bulk to 33.7 million shares or 36.3% of the company.
The Eagle Bulk stake is worth about $118m and the Star Bulk pot $301m at this week’s trading levels.
Worth noting is that Oaktree has been involved with both Eagle Bulk and Star Bulk since 2013.
“I think the recent [dry] investment reflects a number of things — perhaps foremost that Oaktree is patient money in comparison to some other private equity firms,” one finance man said.
I think the recent [dry] investment reflects a number of things — perhaps foremost that Oaktree is patient money in comparison to some other private equity firms
“Alongside that, increasing their stake would seem to suggest that they found shares of those two companies attractive at their valuations at the time, and likely can be seen as a vote of confidence in the dry bulk sector more broadly.”
Of course, such patience can be interpreted in different ways.
Gift that keeps giving
Scorpio Group president Robert Bugbee has long delighted in using Oaktree as something of a pinata at his public-speaking engagements, referring to the investor as “the gift that keeps on giving” to shipping without seeing a profit in return.
Still, Oaktree continues to stay the course — and not just in dry bulk.
Oaktree holds a massive 47.6 million shares and 64.4% investment in Danish product tanker owner Torm at its last filing in February. While Oaktree has not increased the holding since, it hardly needs to as it is worth about $360m at this week’s prices.
The private equity firm has been Torm’s majority shareholder since 2014, when it bought tankers from the struggling owner under direction of lenders and then returned them to Torm in return for equity as part of a financial restructuring.
Oaktree also plays in the chemicals sector through Navig8 Chemical Tankers, the Norwegian over-the-counter partnership with Navig8 Group
Oaktree also plays in the chemicals sector through Navig8 Chemical Tankers, the Norwegian over-the-counter (OTC) partnership with Navig8 Group.
Long-standing collaboration
The California firm might have seemed a little less patient with that venture in July, when TradeWinds reported Oaktree had forced a change in the management team over discontent with financial results and technical issues with the coatings of some tankers.
This is another long-standing collaboration, with Oaktree and Navig8 having co-founded the company in August 2014.
The partners ultimately patched up their differences. Although Navig8 chief executive Nicolas Busch stepped down as chief executive of the chemical outfit, the parties affirmed a renewed collaboration under which Navig8 would continue to manage all 24 coated tankers for at least 24 months.
The size of Oaktree’s stake in that venture is unknown.
