Pappas charts Star's rise

Petros Pappas has vowed to pursue further consolidation in the dry cargo market after creating the largest US listed bulker owner via the merger of Star Bulk and Oceanbulk.

Nasdaq-listed Star will boast Oaktree as its main shareholder and it will have both affiliated companies and rivals in its sights, Pappas says.

“One of the primary goals of the transaction is to create a market leader that can continue to acquire additional vessels and fleets,” Pappas said on a conference call after the deal was announced.

Shipping's largest private equity investor Oaktree will have a 61.3% slice of the new company with Pappas controlling 12.5% of the stock.

Oaktree is the dominant investor at Excel Maritime and is a key player at Eagle Bulk having bought debt in the secondary loan market.

“We have been actively searching for additional assets to acquire and will continue to engage in discussions,” Pappas said. “We may enter discussions at any time with either third parties or affiliates."

He added: “We are focused on further expansion and will continue to acquire opportunistically high quality tonnage at attractive prices.”

Pappas says the fact Star Bulk was managing the Oceanbulk fleet made this “an easy merger”.

“It’s an easy play for the two companies as we do not need to change too much to do it,” he said.

Star top on the Street

Star Bulk will have a fleet of 69 vessels when the deal is completed, which at 8.701 million deadweight tons places it just ahead of Scorpio Bulkers at 8.664 million dwt, the former’s presentation said.

Knightsbridge is the largest capesize owner on Wall Street with a fleet running to 6.985 million dwt. 

Pappas said: “An additional benefit of the merger is to increase our exposure to what we believe will be a rising rate environment.”

Spyros Capralos, who will become chairman after the deal, explains when the fleet is fully delivered in 2017 a $1,000 per day rise in the capesize market and a $400 per day climb in panamax and supramax rates will be worth an extra $17m in core operating profit.

Capralos, the erstwhile chief executive, said: “Star can be a natural consolidator in a fragmented market.”

He added: “We are a company that has been transformed in the past couple of years. I think there is still room for further growth and we will be evaluating the market.”

The enlarged Star Bulk will have newbuilding commitments of $1.599bn, of which $229.4m has been paid and $532.1m in financing has been secured.

A funding gap of $203m will be met via the capital markets and cash flow, Capralos said.

Prior to the deal, he estimated Star Bulk was $100m to the good on its newbuilding investments and Oceanbulk $200m up.