Scorpio Bulkers continues to whittle down its enormous orderbook in the face of depressed rates, selling seven newbuild contracts for USD290 million.
On 21 April the Emanuele Lauro-chaired company sold three Capesize newbuilds by Daewoo Mangalia in Romania for deliveries in 4Q15 to 2Q16, a Kamsarmax being built in China for 1Q16 delivery, and three LR1 product tankers being built by South Korea’s Sungdong for deliveries from 2Q17 to 3Q17.
NYSE-listed Scorpio Bulkers began ordering newbuilds in July 2013 and purchased its final contract in June 2014. At its peak, it had 80 newbuilds on order for deliveries through 2016.
Following the dry bulk market collapses in 2H14, Scorpio has been back-pedalling on its orderbook, seeking to reduce exposure to the extent possible.
It has converted nine Capesize orders into product tanker orders, four of which are being sold to sister Scorpio Tankers, three of which were sold in the just-announced deals, and two of which are being held for sale. It has now sold a total of five bulker contracts: two Kamsarmaxes and three Capesizes, with an additional Kamsarmax contract classified as held for sale.
The latest divestments are in line with Scorpio’s “roadmap of ensuring survival in the brutal dry bulk market downturn at the expense of eventual upside, which is understandable as one needs to make it to the inevitable market recovery before worrying about operating leverage to an upturn”, said Evercore ISI analyst Jon Chappell.
Scorpio Bulkers’ management “should be commended for taking the difficult measures to help the company survive in an unprecedented market trough as opposed to hoping for a market recovery, though we also note that ill-timed purchases put the company in this predicament to begin with”, said Chappell, who estimates that Scorpio Bulkers lost about USD62.5 million on the seven newbuild contracts it just sold.