DryShips battens down the hatches

DryShips Inc. said it is making two transactions to reduce its future financial commitments and improve its financial strength, and said it expected a large loss in the fourth quarter.

   The company said it is disposing of three capesize newbuildings, and canceling the acquisition of nine capesize vessels, including five newbuildings.

   "These two transactions will reduce the company's capital expenditure commitments by over $1.5 billion in initial transaction value," DryShips said Thursday. "In addition, during this period of lower freight rates and an impaired credit market, the company will suspend dividend payments on its common stock. Based on these transactions and policies, the company expects to improve its balance sheet and enhance cash flow that will provide the company greater financial flexibility in this challenging environment."

   The company said it expects to report fourth quarter time charter equivalent revenue of $184.2 million to $208.7 million and a net loss of $380.6 million to $431.4 million, noting that these were preliminary estimates.

   The loss will come about because of a variety of "other items" including an "unrealized mark-to-market interest rate swap loss of about $177 million, a $160 million cancellation fee for the cancellation of four Panamax vessels, and a $116.4 provision for disposal of the three capesize newbuildings.

   "Our preliminary results reflect lower revenues due to the weakness of the dry bulk market in the fourth quarter and charges associated with strategic initiatives undertaken by DryShips to reduce its capital expenditure commitments," said George Economou, the company's chairman and chief executive officer.

   DryShips stock closed Thursday at $10.49. It has ranged in the past year from a high of $116.43 to a low of $3.04.

Source: America Shipper