DryShips posts loss, suspends dividend

Lloyds List reports DryShips has cancelled orders for ships. However, I think the more interesting news is they have suspended their dividend payments (which is why most people bought this stock), and also announced a substantial loss in the 4th quarter of 2008. Wonder what this will do to their total 2008 performance.

... the company has suspended dividend payments on its common stock, beginning with the last quarter of 2008, in a bid to retain capital.

The “corrective measures”, as the company termed them, were revealed as DryShips also disclosed it expects to make a substantial loss for the last quarter of last year.

Though preliminary and unaudited, the company said it expects to post a net loss of between $380m and $431m after provisions to cancel ships, including a previously announced disposal of four panamaxes, as well as $177m in unrealised interest rate swap losses.

There is more gobbledygook in the article about how the monies for cancellations will be handled. What is really worrisome is they might issue more stocks to pay for the cancellations.

The company said the cancellation fee for that deal would include 6.5m shares issued to “entities unaffiliated with the company nominated by third-party sellers which will be subject to a six month lock-up period”.

Entities controlled by Mr Economou will only get 3.5m “out of the money” warrants, each entitling the holder to purchase one DryShips share.

It is understood that these will vest in three tranches over 18 months with strike prices of $20-$30 per share.

“In each transaction, counterparts are willing to take either some or all of their consideration in the form of DryShips equity securities,” said Mr Economou. “We believe these transactions enhance shareholder value, as the value recaptured from the cancelled transactions is dramatically higher than the consideration to be delivered by us for the cancellation.”

For the other three capesize disposals, about $36m in deposits would be forfeited, as well as $30m paid to an undisclosed buyer. Two further tranches of $25m may be paid in cash or by issuing 2.6m shares, the company said.

I need to look at the pictures, but I would guess that Mr. Economou's nose grows with each one of these announcements.