Two major dry bulk owners Star Bulk and Eagle Bulk embark on a merger, while Pacific Basin secures further finance and Golden Ocean looks ahead to 2024
Merger
Star Bulk and Eagle Bulk Shipping have set in motion a merger to create a 169-vessel owned dry bulk carrier fleet.
Nasdaq-listed Star Bulk Carriers Corp (Star) and NYSE-listed Eagle Bulk Shipping Inc (Eagle), have entered into a definitive agreement to combine in an all-stock merger on a Net Asset Value to Net Asset Value basis with a pro forma market capitalisation of approximately US$2.1Bn.
Star Bulk chief executive Petros Pappas said, “Bringing together Star Bulk and Eagle will create a global leader in dry bulk shipping with a large, diversified, scrubber-fitted fleet. Together, we will benefit from greater scale with 169 owned vessels, generating meaningful synergies and building an even stronger financial profile.”
Eagle Bulk chief executive Gary Vogel said, “We are very excited to be joining forces with Star Bulk, uniting two best-in-class companies, both commercially and operationally. We are bringing together two highly complementary organisations and are confident this accretive merger with Star Bulk will unlock significant value for Eagle shareholders, including the opportunity to participate in the long-term upside of the combined company.”
Cravath, Swaine & Moore LLP is serving as legal counsel to Star and Houlihan Lokey is serving as financial advisor to Eagle, with Akin Gump Strauss Hauer & Feld LLP serving as legal counsel to Eagle and Hogan Lovells US LLP serving as legal counsel to the board of directors of Eagle.
The transaction is expected to close H1 2024.
Finance
PB Vessels Holding Ltd, a subsidiary of the Handysize and Supramax bulk carrier owner Pacific Basin Shipping, has secured a US$150M three-year unsecured revolving credit facility.
The facility was extended by a syndicate of international banks led by BNP Paribas and Citigroup Global Markets Asia Ltd as joint co-ordinating mandated lead arrangers and bookrunners.
This is Pacific Basin’s first sustainability-linked financing with key performance indicators that focus on carbon intensity and crew safety - key ESG priorities for Pacific Basin.
Watson Farley & Williams advised the Hong Kong-listed dry bulk shipping company, and the WFW team was led by Asia finance group head and partner Madeline Leong, working closely with counsel Ryan Tan.
2024 prospects
In its Q3 2023 financial report, dry bulk owner and operator Golden Ocean made some broad-brush comments on the outlook for the dry bulk sector.
The company noted that China continues to be the main driving force behind dry bulk demand, accounting for over 50% of dry bulk tonne-miles and that the government’s actions in reducing mortgage rates and lowering minimum downpayment amounts for both first-time and second-home buyers will boost infrastructure investment, which creates a strong demand for iron ore.
It also noted China’s post-pandemic stimulus has focused on boosting demand outside of the real estate sector, which has positively affected the demand for bauxite and the share of Capesize tonne-miles attributed to bauxite cargoes has increased from 8.4% in 2021 to 12.5% in 2023. This trend is expected to continue as China intensifies electric vehicle production.
On the fleet supply side, Golden Ocean noted the orderbook is at a near 30-year low as a percentage of the operating fleet, and there are optimistic expectations for an improving freight market. The global dry bulk fleet, which has grown by approximately 4.2% per year on average over the past decade, is projected to grow by 2.9% in 2023 and 2.2% in 2024. These growth rates are significantly below the levels required for organic replacement.
Overall, China’s influence on the dry bulk market, combined with the positive outlook for fleet supply, indicates a promising future for the industry.
LNG as marine fuel
MOL has announced it has decided to expand its fleet with an additional five newbuilding dual-fuel Capesize dry bulk carriers, which can burn either LNG or conventional marine fuel oil.
Two of the vessels will be ordered at Nihon Shipyard and be built by Imabari in Japan and three will be built by CSSC Qingdao Beihai Shipbuilding in China.
The vessels are slated for delivery from 2026 to 2027.
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