Dale Ploughman, the Chairman and CEO of Seanergy Maritime Holdings
Corp. (NASDAQ: SHIP) (NASDAQ: SHIPW), was interviewed by Barry D.
Parker of BDP1 Connect, contributor to Capital Link Shipping. The
interview focused on the development of Seanergy and on the dry
cargo sector. Please find below the interview in its entirety. A
PDF copy of the interview can also be accessed on
www.CapitalLinkShipping.com or by clicking on the link below
http://shipping.capitallink.com/files/Interviews/2010/Barry_Parker_Interviews_Dale_Ploughman.pdf
Barry Parker: Since Seanergy commenced
operations on August 28th 2008, the company has grown at a
significant pace. You've been very clear about your intentions of
being amongst the market leaders, and you've followed through in
quite an aggressive manner. Can you go through some of the
highlights of what you've been able to accomplish in just two years
as an operating company?
Dale Ploughman: Since the time of
completion of our business combination in August 2008, we have
embarked on a growth strategy seeking prudent acquisitions that
would enhance shareholder value for the longer term without
sacrificing the health of our balance sheet. As you mentioned, our
ultimate goal is to be among the industry leaders both in terms of
the size of our fleet and the quality of our shipping
operations.
Just to reiterate, since August 28, 2010 we have grown our
controlled fleet from 6 dry bulk carriers to 20. Through these
acquisitions we optimized our fleet profile, as we now operate in
all vessel classes of the dry bulk sector and we have achieved a
charter portfolio that generates sizeable and stable cash flows
with significant upside potential.
The expansion I described happened in two steps. The first one
took place in August 2009. In just one year after completing the
transition from a blank check company to an operating entity, we
almost doubled the size of our fleet from 6 to 11 vessels with the
acquisition of a controlling interest in Bulk Energy Transport,
which was comprised of five drybulk carriers, four Capesizes and
one Panamax vessel.
Then in May of this year, with the gross proceeds of an equity
offering we completed in February 2010, we acquired a 51% ownership
interest in Maritime Capital Shipping Limited, which has a fleet of
9 handysize vessels thus we expanded our controlled fleet from 11
to 20 vessels.
Following up on our intentions to acquire the minority stake in
MCS and BET we announced last week that we have entered into
letters of intent for the acquisition of the remaining ownership
percentages in each of BET and MCS, thereby incorporating 100% the
companies into Seanergy. The acquisitions are expected to close by
September 15, 2010 by the MCS and BET Sellers and Seanergy.
So, in the short period of less than two years as a publicly
traded company, we have more than tripled our controlled fleet from
6-20 vessels, quadrupled our deadweight tonnage and enhanced our
fleet's operational versatility without sacrificing the strength of
our balance sheet.
Barry Parker: You have a track record of
achieving fleet growth at a reasonable price through these
accretive acquisitions which preserve shareholder value. However,
this has not yet been reflected in the market value of Seanergy's
shares, which have been stagnant since the January equity offering.
What are your comments on this, and specifically, what do you
believe to be the reasons behind the lack of momentum?
Dale Ploughman: Let me start by saying
that I believe Seanergy is an extremely attractive buying
opportunity for value oriented investors given our growth track
record, the quality of our operations and the prospects of our
company.
The reality is that despite our large industry footprint and
growth ambitions, for the moment we are still a small cap company
and that has limited the investor universe that follows our
company.
In addition, until recently, there was no research coverage on
Seanergy, and to some extent this contributed to our lower
visibility. But on August 23, 2010, Rodman & Renshaw initiated
research coverage on our Company and we expect another house to
initiate coverage in the near future as well. This will help
increase our profile in the investment community.
Also, the fact that we owned controlling interests in two
entities, BET and MCS Shipping, made our company appear more
complex than it really was. We answered this concern by entering
into letters of intent to acquire the remaining ownership in both
BET and MCS. This deal was agreed at a premium of 14% on the share
price based on the closing price of $0.92 on August 25th and
generates several benefits to our Company. It simplifies our
balance sheet and ownership structure, expands our revenue and
profit generation capacity and is accretive to earnings per share.
Projected EBITDA post acquisition is $78.8 million in 2011. By
issuing new shares at a premium, we avoided dilution and the
significant cost usually associated with capital raising and
indicates the sellers confidence in the future prospects of
Seanergy. Details of this transaction can be found on our website
www. seanergymaritime.com and navigating to the August 27, 2010
press release.
There are two schools of thought on the size of the principal
shareholders stake in the company and some of the related party
interactions. Some applaud the size of the stake and the
interactions and there are others that don't. The Restis family
remains a controlling shareholder their stake in the company grew
due to the process of moving from a blank check company to a fully
operating company. However the size of their stake was not the
original intention but came about due to their wish to see Seanergy
succeed, if you look at the short history of the company you will
note that when Seanergy has used its paper to acquire minority
interests or take out notes due, that the transaction has been very
accretive to Seanergy and ALL its shareholders despite the fact
that the Restis Family's stake in the company has grown. They have
made no secret of the fact that they would not mind seeing their
stake being diluted but this should be done by expansion rather
than selling down. Their percentage ownership has decreased
following the February equity offering, which by the way increased
our free float and significantly improved the liquidity of our
shares. Our average daily volume for the last three months is about
230,000 shares, which is very good given our size and compares very
favorably to other sector companies.
Barry Parker: Why is the relationship with
the Restis family an advantage to Seanergy?
Dale Ploughman: The Restis family is one
of the powerhouses in global shipping. The Group controls a fleet
in excess of 100 vessels in most market segments. So, very simply,
the association with such a group gives us unique competitive
advantages both on the operating and the commercial side. On the
operating side, we benefit from significant economies of scale and
on the commercial side we benefit from access to an extensive
network of charterers and other end users. We should also mention
access to long-established banking relationships and deal flow in
the sales and purchase markets that would not be easily available
to a smaller company of our size. However I do understand that the
non affiliated shareholder may question this, so we have put in
place a method of bench marking by having the technical management
carried out by three separate companies one of which is affiliated
to the Restis Family and the commercial brokerage is split between
in house and Safbulk a Restis affiliated company, by doing this not
only are we able to bench mark we are able to tap a broader base of
skills and economies scale
To make the point, whereas most shipping companies acquire
single vessels, we have been able to acquire en bloc entire fleets,
Five vessels the first time and nine vessels the second time.
Another advantage is that here is a family that really understands
shipping, has a real desire to see Seanergy succeed and is there to
support the company for the benefit of all shareholders, as was
evidenced in signing of the LOI last week.
Barry Parker: Where do you see the market
today in terms of asset values? Currently, what opportunities have
you seen to grow the fleet, and will you continue to seek multiple
vessel acquisitions as opposed to single vessels?
Dale Ploughman: A stronger freight rate
environment has led to firmer asset values, which however remain at
the lower side of their historical levels. For Seanergy, we will
always continue to look for the right opportunities to expand
further, but we are not in a rush. We completed our first priority
which was to buy out the minority stakes in BET and MCS Shipping
which as I mentioned simplifies our balance sheet and shareholding
structure. Moving forward, we will look to see how we can further
enhance shareholder value, in the matter of fleet expansion my
preference is to absorb fleets rather than individual ships. But
having said this we will not over look any innovative and accretive
single ship acquisitions.
Barry Parker: What is your opinion on the
supply side, specifically with regards to the order book? Some
sources indicate that the current delivery schedule is higher than
most had previously expected. What do you see is the likely impact
on demand following Russia's ban on wheat exports? Is this good or
bad for dry bulk shipping?
Dale Ploughman: As of July 2010 the dry
bulk order book stands at 60% of the global fleet, well below the
peak of 80% in the second half of 2008. For Capesizes, the
orderbook is currently at roughly 81% of the existing fleet, while
Panamaxes are around 58%. Dry bulk carriers have increased by about
400 vessels, which is approximately 37 million DWT, according to
Clarksons. Financing restrictions as well as high order prices
continue to create uncertainty for the orderbook. In addition, new
orders for 417 bulk carriers for delivery from 2012 onwards have
been accepted. This will lead to the eventual return of port
congestion becoming a growing factor with a record number of
vessels at anchor around the world, and as the forward forecast for
iron ore is that exports will grow by 104% over the next 5 years
and coal exports will grow by 59% over the next 5 years we can
expect a robust demand curve over the medium term. Which combined
with the myriad of other factors will lead to a balance in the
supply and demand curves and there by producing an acceptable rate
environment. Although in my opinion we will on the aggregate have a
rate environment that is acceptable we will have a fair amount of
volatility, due to the uncertainty of the order book and the fact
that people are still ordering today, rather than take advantage of
re-sales or wait to see what the outcome will be once the miners
and steel mills vertical integrated schemes are in place and
operating.
In the short term Russia's ban on wheat exports has and will be
a boon to the smaller size ships that is to say Panamax and down,
as Russian grain exports are usually a staple supply for many
countries and their absence from the export market will necessitate
grain being sought from further afield, creating additional ton
miles and thus greater demand for tonnage.
Barry Parker: What do you plan to do about
the Seanergy warrants?
Dale Ploughman: These are set to expire in
September 2011. One option is to let them expire, the other is to
lower their exercise price so that they can be utilized as a source
of capital for Seanergy. We are currently evaluating several
alternatives regarding the warrants but we have not yet reached any
decision.
Barry Parker: Your fleet has one of the
highest time charter coverage ratios in the sector, protecting you
against current market volatility. What is your view of the market
for the remainder of 2010 and what are your plans for the vessels
that will come off charter in 2010 and 2011?
Dale Ploughman: As of today, we have
secured 95% of our operating days for 2010, 64% for 2011, 30% for
2012 and 19% for 2013 under period employment. Overall, our current
charter portfolio enables us to enjoy significant cash flow
stability and visibility coupled with upside potential through the
profit sharing arrangements on three of our vessels and the portion
of our fleet that is gradually opening for rechartering in improved
market conditions. We will continue to look for term employment to
ensure good forward visibility. We are still a small company of
only 20 ships and as such too small to play the spot market without
causing our investors anxiety and uncertainty something I wish to
avoid.
Just to demonstrate the leverage we can have with improving
market conditions, we recently announced the fixing of one of our
Panamax vessels, the 1994 built M/V Hamburg, for two years at a
base rate of $21,500 per day and a ceiling of $25,500 per day, with
a 50% profit sharing arrangement to apply to any amount in excess
of the ceiling less a 5% brokerage commission. The spread between
floor and ceiling will accrue 100% to Seanergy. The base used for
the calculation of the rate will be the Baltic Panamax 4TC route.
This on the basis of the floor is an increase in the rate year on
year of 39%.
Regarding the overall market, drybulk shipping is, and will
remain a vital link to the global economy and we are in this
business for the long term. Weaker markets, as those we experienced
recently, create opportunities that stronger companies like ours
can take advantage of and generate shareholder value for the longer
term.
The macroeconomic environment remains very favorable for drybulk
shipping and we expect further sustained increases in the shipment
of drybulk commodities.
Thank you, Dale. It's always a pleasure to talk to you, and I
look forward to monitoring your progress in the coming months.
About Barry Parker:
Barry Parker is a financial writer and analyst. His articles
appear in a number of prominent maritime periodicals including
Fairplay, Seatrade, Lloyds Shipping Economist and James Transport
Finance and Capital Link Shipping.
For more information on Seanergy, please contact: Nicolas
Bornozis Capital Link, Inc. Tel. 212-661-7566 E-mail:
seanergy@capitallink.com
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