- Company completed its spin-off from Seanergy Maritime Holdings last week.
- Discussing Monday’s non-dilutive acquisition of four second-hand Aframax tankers.
- New credit facilities will require refinancing or raising new equity by the end of next year at the latest point.
- Considering the elevated valuation relative to the company’s closest peers and likelihood of substantial dilution going forward, investors should avoid the shares or consider selling existing positions.
That said, with just 1.5 million common shares currently outstanding, I would strongly advise against taking a short position at this point as the stock might be taken for another ride by the momentum crowd at any time, quite similar to last week.
Last week, United Maritime Corporation (NASDAQ:USEA) or “United” completed its spin-off from Seanergy Maritime Holdings Corporation (SHIP) or “Seanergy” to “pursue a diversified business model and greater exposure to different shipping segments”.
The company wasted no time expanding its fleet and on Monday announced the “accretive“ purchase of four second-hand vessels for an aggregate purchase price of $79.5 million:
- two Aframax crude tankers built in 2006 and
- two LR2 product tankers built in 2008
Indeed, charter rates have been decent for both Aframax crude and product tankers in recent months so these vessels should start generating meaningful cash flow for the company very soon.
That said, the LR2 product tankers will likely be due for their 15-year special survey next year while the crude carriers will also require drydocking for their intermediate 17.5-year survey.
In contrast to peers Imperial Petroleum (IMPP, IMPPP) and OceanPal (OP), the company actually managed to significantly expand its fleet without diluting common shareholders:
In sum, the tanker quartet will be financed as follows:
Given the rather short term of the new credit facilities provided by EnTrust Global, the company will have to arrange refinancing or raise new capital in the not-too-distant future.
In addition, the issuance of additional dilution-protected 6.5% Series C Convertible Preferred Shares will provide former parent Seanergy a decent opportunity to grab back up to 29.9% of the company on the cheap should dilution cause the price of the common shares to crater like witnessed at peers Imperial Petroleum and OceanPal.
While the transaction has no direct impact on net asset value (“NAV”), debt service obligations have increased quite meaningfully, particularly when considering the quarterly instalments kicking in next year.
At Monday’s close, United’s common shares traded at a rather moderate 35% discount to estimated NAV, way ahead of former parent Seanergy and closest tanker peers Imperial Petroleum and Performance Shipping (PSHG
Did you subscribe to our daily newsletter?
It’s Free! Click here to Subscribe!
Source:Seekingalpha
