Overview: DryShips’ bank compliance and effective balance sheet

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Nov. 26 2019, Updated 11:27 a.m. ET

DryShips’ bank compliance and effective balance sheet

One of the most important aspects of shipping loans is the value maintenance clause also known as a “minimum required value of assets to loan ratio.” Currently, the market standard is anywhere between 125% and 140% or the value of the finance asset can’t be lower than 125% of the outstanding loan at all points in time.

As compared to its earlier periods, DryShips’ (DRYS) value to loan compliance situation has improved significantly. Meanwhile, fair market value of the company’s mortgage shipping fleet has increased 63% since December, 2012, while ship finance debt has amortized.

DryShips’ fleet-wide value to loan ratio has jumped from 105% from the end of 2012 to 176% at the end of March, 2014. These statistics are even more remarkable considering that the March, 2014, vessel values don’t include two unencumbered vessels worth $76 million.

Debt profile

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As of March, 2014, the company signifies a secured debt profile of the dry bulk and tanker segments. On the dry bulk side, DRYS has 12 secured loan facilities totaling $625 million, which matures at different times between 2015 and 2025. Meanwhile, on the tanker side, it has four secured credit facilities, which mature between 2016 and 2019.

The mandatory debt amortization for DRYS shipping segment excluding balloons[1. A balloon loan is a mortgage that requires a larger-than-usual one-time payment at the end of the term. This indicates that payments are lower in the years before the balloon payment comes due.] at loan maturities is $72 million, $138 million, and $68 million for 2014, 2015, and 2016. Debt amortization, similar to depreciation which is used for tangible assets, is the paying off of debt with a fixed repayment schedule in regular installments over a period of time. DRYS is taking proactive measures to potentially refinance certain facilities ahead of maturity.

At the end of March, consolidated capital structure is robust—evidenced by the 53% net debt to capitalization ratio. This ratio was recently impacted negatively (higher) by a $425 million net drawdown on the $1.35 billion senior secured credit facility in February, 2014. However, the company raised $84 million under its ATM program during January, 2014, which mitigated the increase somewhat.

DryShips peers include Safe Bulkers Inc. (SB), Navios Maritime Holdings (NM), Diana Shipping (DSX), and Navios Maritime Partners (NMM).

 

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