Genco Shipping & Trading Limited (NYSE:GNK) announced that it has entered into an agreement with Bourbon SA to acquire 16 Supramax vessels, including two newbuildings, from Setaf SAS, a wholly owned subsidiary of Bourbon SA, for an aggregate purchase price of $545m. The acquisition is subject to the completion of customary documentation and closing conditions.
Genco intends to retain 13 of the vessels, 12 of which are expected to be delivered to Genco in the third quarter of 2010, with the remaining vessel scheduled to be delivered in the first quarter of 2011. Six of these 13 vessels are secured on time charters with remaining durations between approximately one month and 54 months. The transfer of these time charters to Genco is subject to the charterers' consent. Upon completion of the acquisition, and including the five Handysize vessels to be acquired from companies within the Metrostar group of companies announced on June 9, 2010, Genco's fleet will consist of 53 drybulk vessels with a total carrying capacity of approximately 3,813,000 dwt and an average age of approximately 6.4 years.
Genco plans to finance the acquisition of these vessels using bank debt for approximately 60% of the purchase price, cash on hand, and up to $150m of capital markets financing in the debt, equity-linked and equity markets, depending on which is more attractive at the time. If Genco does not obtain financing sufficient for the acquisition by July 13, 2010, Genco may cancel the acquisition.
Genco has determined not to retain three of the 16 Supramax vessels covered by the agreement, including one newbuilding. Therefore, upon delivery of these vessels, which is expected in the third and fourth quarters of 2010, Genco plans to immediately resell them at Genco's aggregate purchase price of approximately $105m to Maritime Equity Partners LLC, a company controlled by Genco's Chairman, Peter C. Georgiopoulos. An independent committee of Genco's board of directors reviewed and approved this transaction.
Robert Gerald Buchanan, President, commented, "We are pleased to enter into our second acquisition this month, as management has once again capitalized on an attractive growth opportunity for the benefit of the Company and its shareholders. Building upon the recent acquisition of five Handysize vessels, our agreement to acquire 13 Supramax vessels at a compelling valuation significantly strengthens Genco's industry leadership and enhances the age profile of the Company's modern fleet. As we continue to take advantage of the positive long-term demand for core commodities in China, India and other developing countries, we will maintain our focus on employing a large portion of our expanding fleet on favorable contracts with world-class charterers."
John C. Wobensmith, Chief Financial Officer, commented, "With this agreement to acquire 13 Supramax vessels, combined with our recent agreement to acquire five Handysize vessels, Genco is poised to considerably expand its modern, high-quality fleet by 31% on a deadweight tonnage basis and solidify its position as an industry bellwether. In maintaining our disciplined approach to growth, this en bloc transaction meets our strict return criteria related to earnings and cash flow accretion as well as return on capital hurdles. We plan to utilize our sizeable cash position to partially finance this acquisition and will draw upon our strong history of entering into financing transactions to meet the remaining requirements for the 13 Supramax vessels. By actively consolidating the industry as we have consistently done in the past, we expect to further strengthen Genco's leading brand as an owner and operator of modern tonnage and increase the Company's future earnings power."