Golden Ocean has closed a 11.7m share issuance at USD 8.5/sh to finance the acquisition of two modern Capesizes from Hemen and to raise gross USD 66m in cash. After this latest equity issuance and given the improved market fundamentals, Golden Ocean intends to terminate the covenant waivers on the recourse debt in order to facilitate M&A activities and dividends. We reiterate our BUY rating and nudge up our target price to USD 9.7 (9.5).
Vessel acquisitions: The company announced after NY close yesterday the acquisition of two Capesizes from Mr Fredriksen’s privately owned Hemen Holding at USD 43m each. Although undisclosed, we believe the vessels to be the South Korean 2016-built Sea Monterrey and Sea Behike (previously owned by Scorpio Bulkers). We estimate a generic valuation for these vessels at USD 43.4m each.
New equity: The company will issue a total of 11,764,705 new shares at USD 8.5/sh (equal to last close), split between USD 66m in gross new cash and 4m shares issued to Hemen as part payment for the aforementioned Capesizes. The balance payment of USD 52m will be finance with USD 43m in a seller’s credit (LIBOR+3%, non-amort, 3y maty) and USD 9m in cash.
Valuation: Although the vessel acquisition price is similar to our estimated market value, issuing equity at P/NAV 1.2x is accretive to our valuation. We raise our target price to USD 9.7/sh (from 9.5) and reiterate our BUY recommendation.
Source: Gersemi Research, Bloomberg, company data
Disclaimer: The publisher currently owns shares in the company. More disclaimers at the end of this document