After its shares plunged on Tuesday due to defaulting on three loan payments, the Athens-based owner of drybulk carriers and offshore support vessels DryShips Inc. entered into an agreement with an institutional investor for the sale of 5,000 newly designated Series C convertible preferred shares.
The deal between the parties also includes warrants to purchase 5,000 Series C convertible preferred shares and 148,998 common shares, DryShips said, adding that the securities will be issued to the investor through a registered direct offering.
DryShips estimated that the net proceeds from the sale of the securities, after deducting fees and expenses, will be approximately USD 5 million.
The company also said it may receive up to an aggregate of USD 5 million if all of the warrants are exercised, for total proceeds of USD 10 million.
As of March 31, 2016, three of the company’s bank facilities have matured and DryShips has not made the final balloon installments nor any other payments to date.
Therefore, the company had defaulted on three loan payments, which amount to USD 213.7 million through March 2017.
DryShips had USD 280 million in total liabilities as of March 31, 2016, according to a Securities and Exchange Commission filing.
Given the prolonged market downturn in the drybulk segment and the continued depressed outlook on freight rates and vessels’ market values, cash expected to be generated from operations or proceeds from the sale of vessels, “will not be sufficient to cover the company’s working capital deficit.”
In an effort to improve its liquidity position, DryShips sold all of its tankers and 19 bulkers or bulker owning entities, while the remaining vessels were classified as held for sale and were carried at fair value.
In the first quarter of the year, DryShips reported a net income of USD 55.4 million, against a net loss of USD 59.2 million seen in the same period in 2015.
The net income included the company’s vessel impairment charges and loss on sales, which were at USD 40.8 million for the quarter, as well as a net income pick-up from the company’s 40.4% ownership in Ocean Rig of USD 116.5 million.
The company also reported a negative adjusted EBITDA of USD 15.6 million for the quarter.