EuroDry Ltd., an owner and operator of dry bulk vessels and provider of seaborne transportation for dry bulk cargoes, has announced an agreement to acquire M/V Blessed Luck, a 76 704 DWT dry bulk vessel built in Japan in 2004 for US$12.12 million.
The vessel is majority owned by a third party and has been managed by Eurobulk Ltd., also the manager of three of EuroDry’s vessels. The vessel is expected to be delivered to the company within May 2021. The acquisition will be financed partly by a short-term sellers’ credit of US$5 million and a one year bridge loan of US$6 million provided by an entity affiliated with the company’s Chief Executive Officer with the remaining funds coming from the company; both the sellers’ credit and short-term loan carry an annual interest of 8%. In parallel, the company is in the process of arranging a bank loan with the acquired vessel as collateral, expected to be finalised within approximately three months, which will provide sufficient funds to repay the sellers’ credit and, possibly, part of the bridge loan. At the same time, the company entered into a charter agreement for the vessel for a period between a minimum of 11 months and a maximum of 13 months at a rate of US$19 500/d which will commence upon delivery of the vessel and contribute about US$4 million of EBITDA during the minimum period of the charter.
Aristides Pittas, Chairman and CEO of EuroDry commented:
“In stark contrast to a year ago, it has been a very positive 2021 so far with dry bulk rates rebounding significantly as a result of solid trade growth and limited supply growth. The latter, especially, is constrained by short- and medium-term factors: in the short-term, by inefficiencies in the vessel-port transportation system that resulted from COVID-19 effects and required protocols and, in the medium term, by the lowest orderbook in the last 20+ years. We believe that the market is likely to remain strong for the next couple of years provided that demand for transportation of dry bulk cargoes - which is generally linked to economic activity - will maintain at least a historically average growth rate; it is noteworthy that the IMF, amongst others, predicts that economic activity will rebound above historical average levels as the world recovers from the COVID-19 pandemic.
In such a positive environment, our main strategy is to try to expand our fleet in a risk efficient way despite our limited funds available for investment. Thus, we acquired M/V Blessed Luck, a 2004-built vessel, with a combination of seller and affiliate bridge loans to complement our cluster of medium-age Japanese-built Panamax-size vessels alongside our cluster of own-built new-buildings. The acquisition of M/V Blessed Luck will increase our fleet to eight units and is expected to contribute to a proportional increase in our EBITDA. At the present market rate levels, we are to accumulate funds that will provide us with several investment or expansion options or shareholder reward models. We, further, believe that the strong dry bulk markets enhance the value of our public listing as a consolidation platform and we continuously investigate opportunities to take advantage of it.”