Delphin Shipping has already seen a paper profit of more than $15m on its fleet sale to Star Bulk Carriers in May.
The 4.5 million shares Star Bulk handed over in partial consideration for Delphin’s 11 ships were worth nearly $49m at market close on Tuesday this week, up from $33.9m at the time of the transaction.
That is the good news for Delphin, which is backed by US private equity firm Kelso & Co.
Share sale restrictions
The bad news may be that under the terms of the deal it is unable to sell more than half of the shares — about 2.25 million — before 23 November.
While shares in Athens-based, New York-listed Star Bulk may well continue their positive run by then, given a continued recovery of day rates and the looming effects of IMO 2020 for its scrubber-equipped fleet, there are no guarantees; prices could also slide.
But at least to this point, the transaction is having exactly the upside Delphin had hoped in the appreciation of Star Bulk shares. The other part of the deal saw Star Bulk pay $80m in cash to scoop the fleet for just under $140m — a true price of nearly $114m once the cost of installing scrubbers is backed out, according to Stifel equity analyst Ben Nolan.
Delphin chief executive Sophocles Zoullas told TradeWinds at the time of the sale that potential upside was a key element.
“This is a good transaction for all stakeholders that allows Delphin shareholders to realise future value in an improving dry bulk market,” he said.
“Delphin is not exiting dry bulk, but rather converting its interest into a leading public dry bulk company.”
Exit process
The process for Zoullas and Kelso to exit the investment took another step this week when Star Bulk registered 2.97 million of the shares with the US Securities and Exchange Commission for possible future sale.
Although that is not the full complement, it appears to be a pro-rata figure based on Delphin’s delivery of seven units thus far, with the rest expected to come in the third quarter.
Delphin’s potential profit was even greater before Tuesday’s trading, as Star Bulk shares fell $0.46 or 4.6% on the day.
However, the stock is up nearly 19% from its $9 opening price on 2 January.
The Delphin deal grows Star Bulk’s fleet to 120 ships by doubling its supramax tally to 21, with six 56,500-dwt vessels and four 56,600-dwt units.
The incoming supramaxes are the Aquila, Cepheus, Columba, D Centaurus and Hercules (all built 2012) and the Dorado, Hydrus, Leo, Pegasus and Pyxis (all built 2013). Star Bulk also picked up an ultramax — the 63,100-dwt Apus (built 2014) — bringing its number of ships in that class to 18.
Delphin will own about 4.6% of Star Bulk on full delivery.
