Second-hand bulker deals by public players are piling up. After market close on 14 March, NASDAQ- and Oslo-listed Golden Ocean announced the purchase of 16 bulkers averaging four years of age in a USD412.4 million non-cash transaction, comprising USD285.2 million in assumed debt and USD127.2 million in Golden Ocean stock (based on 17.8 million shares at the 14 March closing price).
Fourteen of the bulkers will be purchased from Quintana Maritime (six Capesizes and eight Kamsarmaxes/Panamaxes) and two Panamaxes will be purchased from an affiliate of Golden Ocean’s largest shareholder, John Fredriksen. The switch to fleet expansion follows Golden Ocean’s postponement of 10 newbuilding deliveries in the fourth quarter of last year and the postponement of eight deliveries in the first half of 2016.

Golden Ocean began a USD60 million equity offering to raise funds for the pre-payment of debt assumed in the acquisition. On the same day as the Golden Ocean deal announcement, Angeliki Frangou-led Navios Partners disclosed that it had priced a USD100 million registered direct offering to fund ship purchases.
In general, the strategy has transitioned to vessel acquisitions among public companies that had previously been divesting ships to assuage their lenders. On 8 March, NASDAQ-listed Star Bulk announced the acquisition of two 2013-built Kamsarmaxes for an aggregate price of USD30.3 million, after closing a USD51.5 million private placement the month before. The Petros Pappas-led company had sold 26 vessels and newbuilding contracts in 2015–16. Following Star Bulk’s latest acquisitions, Stifel analyst Ben Nolan said that the company “has potential for several similar transactions during a cyclical trough”.
On 28 February, NASDAQ-listed Eagle Bulk confirmed that it will buy between six and nine 2012- to 2015-built Ultramaxes from Norwegian OTC-listed Greenship Bulk Trust. Assuming all nine sister vessels are acquired, the aggregate purchase price will be USD153 million, implying an average price of USD17 million per vessel. Eagle Bulk, which closed a USD100 million private placement in January, restarted its vessel-acquisition programme in November 2016 when it acquired a 2016-built Ultramax for USD18.9 million, the company’s first fleet addition in six years. It followed that later in the same month with the purchase of a 64,000 dwt newbuilding resale scheduled for delivery this year for USD17.9 million. In 2016, Eagle Bulk sold four older Supramaxes for a total of USD13 million; the transaction with Greenship Bulk Trust would bring its fleet to 50 vessels.

In the Oslo market, OTC-traded newcomer Songa Bulk raised USD100 million through a private placement in February following a USD74 million capital raise in November 2016, and has been actively deploying capital for vessel purchases. In the US market, ‘blank-cheque’ newcomer Hunter Maritime, backed by the Saverys family, is on the prowl for an initial bulker fleet.

Yet another publicly traded dry bulk owner, NYSE-listed Genco Shipping, is poised for acquisitions after concluding the sale of 10 older vessels. On its 2 March conference call, Genco CEO John Wobensmith said, “One of our main focuses right now is where we go from here in terms of growing the company. We think from a historical asset value standpoint, these are very attractive prices on vessels and we also think the industry is in need of consolidation going forward and we want to play a major role in that.”

He noted that asset values for Ultramaxes and Supramaxes have increased 20–25% year on year, but values have only increased 9–10% for Capesizes, implying that the purchase of second-hand Capes appears more attractive. “As the market recovers, we expect all asset values to move up, but probably a little more for the Capes,” said Wobensmith.

In light of widespread buying interest in the public dry bulk arena, the broader concern is that the rapid-fire second-hand deals presage a shift in interest towards newbuildings that could jeopardise a rate recovery.
In a recent research note, Nolan pointed out that “over the past three months, there has been a surge of public and private capital raising to fund dry bulk acquisitions”. In addition to the recent equity raises by public players Eagle Bulk, Star Bulk, and Songa Bulk, he said, “We understand there are four or five additional private equity firms looking to raise more than USD500 million collectively. If successful, in combination with what has already been raised, there could be nearly a billion of new equity capital for second-hand vessels.”
According to Nolan, “In the past three months, 153 dry bulk vessels were acquired for approximately USD1.8 billion, which drove up five-year-old asset values by about 10%, 10-year-old assets by 20%, and 15-year-old assets by 25% – all this with very little of recent capital raising or potential capital raising having yet to be deployed. The risk is that the gap between second-hand and new vessel prices is close to the point at which ordering again makes sense, particularly as owners look to prepare for the new emission regulations,” said Nolan. “Currently, average five-year-old vessels are about 65% of new vessels prices. Typically, when the ratio rises to 70%, ordering activity picks up. That does leave some room for further inflation, but with eager shipyards, more capital, and higher asset prices may have a nasty side effect.”