The Shipping Sector – A cautionary tale

How can a company go from $ 164 a SHARE  to 5 cents in one year ?  (This is not a misprint.) How can you avoid such a calamity.

I TRACK A GOOD NUMBER OF SHIPPING STOCKS ( one of several such watchlists)  – but no managed funds own any shares in what are still – companies with great potential –  ( emphasis on “great potential  ”  and as I love to say they-  used to say the same thing about me).

Clients call me and object to paying a performance fee . They want to receive the advice for a flat 1 % . They say they can track their own stocks. Potentially yes – the same great potential.

Suppose you decided to enter shipping and you selected  NEWL ( NewLead Holdings)

It is very easy and it takes you 20 minutes. Let’s take the – already out of date ( 2013)  – NEWL fleet list at http://bit.ly/IbWENz and compare it with its debts as disclosed in various SEC filings.

Hiona and Hiotissa, two handymax product tankers, trading spot in a pool. Outstanding loan balance of $58.6m as of 29 June 2011, current value is $32m. Covenants kicking in right now. Bank taking a bath.

Gujarat, Endurance and Tomi, foreclosed by the banks. Not there.

Serenity, sold to Navios at a good price, to repay the related loan ($24m).

Brazil, Australia, China and Grand Rodosi returned to owners, breaching the related charter agreements. Shares flooding the market probably come from here, NEWL paying compensation in shares.

The Newlead Victoria had a loan balance of $26m as of 29 June 2011, with disclosed covenant breaches and temporary waiver until 31 March 2012. Spot-related charter. Current vessel value around $18m. Forget about it.

Grand Ocean had a loan balance of $17.75m as of 29 June 2011 with various waivers until end-2012. Spot. Vessel value, I don’t know, around $8m. Bye bye.

Grand Venetico, spot, value around $7m and Grand Markela, value around $7m+some $6m value of charter until next year. Financed through a revolving credit facility, amount drawn (including for working capital purposes), about $49m. Sayonara.

Remaining handymax newbuilding has a $24m loan against it. To be sold.

 That’s it basically. Effectively Zero fleet. There are some claims against TMT. Together with cash, this will help pay the banks. These guys were so brash even had $81m of goodwill in their accounts. They were bust already a year ago.

 (You can now update this information – let me know what you discovered.)

what would have been the result of your choosing Shipping and NEWL  for its great potential:

NEWLEAD HOLDINGS LTD(NEWL:NASDAQ, US)

0.0561USDDecrease0.0019(-3.28%)Volume: 
Above Average
As of market close 6 May 2014.

QUOTE DETAILS

Open 0.0600 P/E Ratio (TTM)
Last Bid/Size 0.0400 / 35 EPS (TTM) -1,120.69
Last Ask/Size 0.0900 / 24 Next Earnings
Previous Close 0.0580 Beta 2.21
Volume 37,648,135 Last Dividend
Average Volume 22,295,798 Dividend Yield 0.00%
Day High 0.0625 Ex-Dividend Date
Day Low 0.0484 Shares Outstanding 72.0M
52 Week High 164.70 # of Floating Shares 67.41655M
52 Week Low 0.0484 Short Interest as % of Float 0.80%
chart
For more information at no cost or obligation please write info@jackbassteam.com or call Jack direct at 604-858-3202  Pacific Time Monday to Friday 9;00- 5;00

 

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