DryShips bridge loan allows breathing room - 17/07/2014

Economou: “confident that the remaining cash required to fully refinance the bond will be raised.”

Investors remain confident, but are still awaiting long-term solution

WITH its announcement of a new $350m bridge loan, DryShips on Wednesday took an important step in solving its looming maturity problems on its $700m convertible note – although the company must still complete a total refinancing of its outstanding bond.

George Economou-led Dryships will use the cash from the loan, arranged by ABN AMBRO Bank, to pay down half of the 5% unsecured note, which matures in December. From there, the company will have to raise another $350m to either pay off the remaining amount.

Still, the bridge loan, which is due next year, with option for a one-year extension, is “not meant to be a permanent piece of capital”, according to one investor who said the company still “needs a total solution” to its over-leveraged capital structure.

In a statement on Wednesday, Mr Economou assured investors of the company’s ability to raise the rest of the funds needed.

“We are confident that the remaining cash required to fully refinance the convertible bond will be raised prior to the bond’s maturity,” he said.

Bondholders appear to agree, with the convertible note trading at around par. At that trading level, investors feel secure in its options — either getting paid out in full before December, or rolling into a new bond with longer maturities.

“The market is telling you, they don’t view much risk in getting a deal done,” the hedge fund analyst said.

Despite battling low dry bulk freight rates, the company has come this far in large part because of its majority ownership stake in Ocean Rig, an offshore drilling contractor in which Dryships owns 78m shares.

The ABN AMRO bridge loan, for example was secured by an undisclosed number of Ocean Rig shares and, in a worst-case scenario, DryShips could sell Ocean Rig stock – a process Mr Economou has adamantly refused to engage – to help raise new funds as a way to retire the remaining bond.

Trading in the convertible was light on Wednesday, according to another investor and, despite a slight surge in the morning; DryShips stocks finished the day at $2.97 per share to remain flat.

in www.lloydslist.com 17/07/2014