Star Bulk Carriers is working on refinancing 14 of its vessels for more than $155m as it pushes to shore up its balance sheet.
Alongside its first-quarter earnings, the New York-listed dry cargo player said it had, this month, received approval for a $70m loan from ING Bank's London Branch, a $35m loan from Alpha Bank and $50.4m from Piraeus Bank.
In addition to refinancing part of its fleet, the loans will provide Star Bulk with $27.5m in net proceeds, which will be used as working capital.
The company said the loan deals were its next highest priority after dealing with the Covid-19 outbreak and its negative impact on the dry bulk sector.
"We continue to work with lenders to significantly increase this figure in the coming months," chief executive Petros Pappas said of the $27.5m sum.
Those refinancing moves followed Star Bulk borrowing the entire $55m credit facility with DSF, $51.6m of which was used to refinance the 207,555-dwt Star Eleni (built 2018) and 208,000-dwt Star Leo (built 2018), and $24.2m in a working capital facility with HSBC.
Under the ING Bank loan, the 181,258-dwt Star Claudine (built 2011), 108,716-dwt Star Ophelia (built 2010), 179,150-dwt Star Lyra (built 2009), 82,672-dwt Star Bianca (built 2008), 80,448-dwt Star Flame (built 2011) and 82,158-dwt Star Mona (built 2012) will be refinanced.
The Alpha Bank loan will see the outstanding amount on the 180,275-dwt Star Martha (built 2010) refinanced along with the lease agreements on the 81,466-dwt Star Sky (built 2010) and the 81,500-dwt Stardust (built 2011).
Piraeus Bank's deal sees the 82,687-dwt Star Luna (built 2008), 82,158-dwt Star Astrid (built 2012), 80,705-dwt Star Genesis (built 2010), 83,500-dwt Star Electra (built 2011) and 58,680-dwt Star Glory (built 2012) refinanced.
More refinancing to come?
Deutsche Bank analyst Amit Mehrotra said the increase in net debt of only $11m from the end of March to 22 May is "positive in the context of near-record low dry bulk spot rates".
"To be sure, most of the pain is yet to come (ie, second quarter and beyond), but this should also be muted given management's prudent and proactive approach at gaining good charter coverage," he said.
He estimated that the cash balance will decline by about $85m through to the fourth quarter, from a total of $150m available as of 31 March.
"This would still put Star Bulk above its minimum liquidity covenant of $500,000 per vessel ($58m), though it doesn’t leave much cushion," he said.
"In reality, we think additional refinancings will be announced in the coming weeks/months, which will be more than enough and drive a continued relief rally in the shares."
First-quarter results
For the first three months of 2020, Star Bulk reported a $2.8m profit, a turnaround from the $5.3m loss for the same period last year.
The performance, buoyed by a $27.6m gain on forward freight agreements and bunker swaps, came out to $0.03 per share — better than Wall Street expectations of a $0.02-per-share loss.
For the quarter, the company earned $160.9m in voyage revenues, down from the $166.5m for the first quarter of 2019. Daily time charter equivalent rates fell, too, from $11,192 per day to $10,949 per day, while operating expenses held steady at $4,047 per day and general and administrative rose $86 to $1,057.
Ebitda went up year-over-year, from $44m to $57.6m.
Star Bulk's shares closed on Tuesday up $0.18 — or 3.5% — to $5.27.
However, in after-hours trading, they fell $0.32 to $4.95.
