Shareholders in Greek shipowner Navios Maritime Holdings are facing a serious dilution risk following the company's $550m refinancing deal.
The stock crashed 26.5% to close at $3.52 in New York after the announcement on Tuesday.
Norwegian investment bank Fearnley Securities believes the Angeliki Frangou-led company has solved impending bond maturities. But investors were left unimpressed.
The transactions saw Navios Holdings tackle $614m in looming bond payments through deals with banks, lessors and a company controlled by Frangou herself.
The shipowner arranged nearly $263m in payment-in-kind (PIK) loans from an outfit affiliated with Frangou, who is Navios Holdings' chief executive, chairman and largest shareholder.
The bulker owner, which also has the leading stake in Frangou-led Navios Maritime Partners and controls Navios South American Logistics, also struck deals for $287m in new financial firepower through two credit facilities and four sale-and-leaseback agreements.
Leverage is still high
Fearnley Securities analysts Peder Nicolai Jarlsby, Erik Gabriel Hovi and Ulrik Mannhart said: "While the cancellation of repurchased notes eases the company's debt burden, leverage remains high which also is reflected in the cost of the new debt financing with up to 18% PIK on the... loans."
These loans also come with a $24m upfront fee to Frangou's lending company.
"Both the PIK interest and the upfront fee are payable in the form of convertible debentures ... hence imposing substantial dilution risk for Navios Holdings, which we consider explains the majority of yesterday's share price collapse," the analysts said.
The Frangou loan will be paid back through a combination of cash and unsecured debt securities, using shares in spin-off Navios Partners as collateral.
Shares in subsidiary Navios Logistics and membership in Navios Partners' general partner entity also serve as second-lien collateral.
Navios Holdings will make $10m quarterly payments to the Frangou affiliate starting in the third quarter of 2023.
The Piraeus-based shipowner said its board formed a special committee of independent and disinterested directors to negotiate with the Frangou affiliate and evaluate the deal.