To align itself with the unfavorable conditions in the shipping industry, DryShips (DRYS, Financial) has strategic moves to adjust it to the market conditions. Under this strategy, the company aims to operate both its dry and wet vessels to take advantage of sustainable recoveries in these markets in 2014. In this, the shipping company has great expectations from Panamax fleet which is expected to add more EBITDA to DryShips’ shipping segment in 2014 and 2015.
Undertaking good moves
In the past, it made principal repayments of $81.5 million under long-term credit facilities including $55 million prepayment that it agreed previously disclosed supplemental agreement with the HSH-led lending syndicate. This also mislaid DryShips’ cash position. In addition to this the company is having some lagging payments to Rongsheng for the ships under construction so, the situations for DryShips doesn’t seem good in future.
But DryShips is pleased with its ocean rig segment which performed decent in the past. The company is expecting ocean rig to prove as a growth driver to it. This is a positive for DryShips however; this gain will need time to incur. On the other hand, DryShips is pleased with the ocean rig Skyros in Angola commencing acceptance under the contract with Total.
DryShips is worried about the ships that are under construction at Jiangsu, Rongsheng Heavy Industries in China as the company has got many delayed deliveries and also the date of contractual delivery is near. Also according to the contract the company can only cancel the contract 255 days. So if DryShips fail to do so it can cause a great harm to its profitability.
More optimism
Moreover DryShips is optimistic about its discussions with the Nordea-led bank banking syndicates for a $325 million senior secured credit facility to defer certain principal repayments to maturity. Though this will not improve liquidity, it will give additional cushion to its cash balance. Moving ahead DryShips is also in the lead to gain some cash balance in future as the company has $700 million convertible bond which are maturing at the end of 2014. DryShips is expecting to gain traction in the stock market as this cash position might help it to gain market share in the future even under stiff market conditions.
While in Europe and Asia DryShips is expecting large recovery of lost imports from West Africa. Further with the development of new trade rules, the company will have opportunities to recover as a result of longer-than-traditional voyages now. So DryShips remains proactive for maintaining liquidity and is continually trying to rise again by gaining market share in the stiff market conditions in the shipping industry.
Conclusion
DryShips is moving at a good pace to align its business with the industry conditions. As a result, investors should think of remaining invested in the stock for the long run.
