Mystery surrounds role of Heidmar in DryShips profit

Listed owner reaps $9.7m benefit to bottom line, but gain is called 'non-cash'

It appears the 2017 acquisition of a 49% stake in Connecticut pools power Heidmar is already paying dividends for New York-listed DryShips.

The purchase of the Norwalk-based company from DryShips’ founder and principal, George Economou, helped make the difference between a profit and a loss for the Greek company in the fourth quarter.

But exactly how and why this happened is left a bit unclear. As TradeWinds reported last week, DryShips reported net income of $11.5m for the last quarter of 2017.

Without two one-time items, its result would have been a loss of $2.6m.

One item was the sale of DryShips’ 73,000-dwt Ecola (built 2001) to a third party for $4.4m.

But the bigger item was described as “net income associated with ‘mark-to-market’ accounting of the company’s 49% share in Heidmar Holdings LLC, a global tanker pool operator, of $9.7m”.

“[It] has to do with purchase-price accounting and mark-to-market adjustments on the acquisition,” said a DryShips spokesman in response to a query from TradeWinds.

“It does not reflect the [profit-loss statement] of Heidmar. It’s a non-cash adjustment.”

As TradeWinds reported last August, DryShips acquired the Heidmar stake from Economou in a complicated transaction that saw him take a $100m stake in DryShips in return for surrendering the Heidmar shares, some preferred stock and ending a rights agreement.

The transaction thus left murky exactly what DryShips had paid its chief executive for the Heidmar operation.

Sources familiar with the sales process said Heidmar had a tough fiscal year in 2017, as losses from chartered-in tonnage essentially offset profits from managing the pools. It is highly unlikely that Heidmar would have shown a profit for the fourth quarter, they said.

But Heidmar also had about $20m in retained cash on its balance sheet during the tender, they said. A 49% share of that sum would be roughly the $9.7m referenced in DryShips’ earnings report. Another source suggested a different possibility, however.

Heidmar in 2017 retained several above-market time charters that would have had a negative impact on its valuation for acquisition purposes, the source said.

“It is possible that those charters have now rolled off, and that could account for an increase in valuation of the company that they were able to mark to market.”