November Stock Talk II Greed is Good

What do people think of this analysis on DRYS?  Not mine but got it from somewhere else:

I'm trying to construct a worst-case scenario for DRYS's liquidity position over the next 12 months. I would welcome any serious input.

According to my calculation (see below for detail), DRYS has at least $800 mm in cash and cash flow over next 12 months against $600 to $700 of debt repayment and capital financing not covered by debt.

This analysis assumes no draw down on their facilities, which are ample in size. It assumes dry bulk revenues are cut in half. It assumes no other proceeds from share issuance or ship sales (which have already been agreed.) This company has plenty of liquidity over next 12 to 18 months.

Using the 6-K filed on 6 November, I see the following: Liquid cash $329 mm; Restricted cash $127 mm (restricted by loans oustanding, so counts as cash from net debt standpoint; see note 11); Proceeds from shares issued in October: $41 mm (and there have most likely been more issued since) (note 17); Deposit on cancelled sale of Primera $9 mm (note 17). Adding all that up gives you $507 mm in cash today (excluding effect of operations and potential share issuances since then).

Moving to cash from operations, on a run-rate basis, if you conservatively cut in half the bulk-segment revenue in Q3(from 240 to 120 mm) and didn't change costs, you would have EBITDA of $111 mm per quarter (pre-profit from ship sales, which by the way is well below Wall St. research estimates). Deducting $35 mm per quarter for interest and another $2.5 mm for maintenance capex, that gives you free cash flow before debt service of $74 mm per quarter, or ~$300 mm per year.

Add that to the $507 mm in cash today for $800 in cash over the next 12 months.

The debt due by 30 Sep is $540 mm. I'm assuming about another $100 mm in equity commitments for hulls 1865 and 1866, which only have $16 mm in debt outstanding which certainly won't be due in the next year. It seems from pg 8 of the 6-K that DRYS has the option to get out of hulls 1837 and 1838 (with no further cost?), so I'm not counting those. So I gather they have cash commitments outside of operations / working capital / interest of $600 to $700 mm, well below the cash and cash intake over the next twelve months.

VH2,

I dont think you are including the cash flow from Primelead here are you?

The two rigs are making 550k or so average, less 150-175 costs, direct and indirect. Thats around 720k a day cash flow that contributes to the entire company until and if the spin occurs.

The issue isnt debt load, thats not why the stock has gone down it is the issue about debt covenants.

Check out this link and read the presentation-

LINK

There is enough cash flow to handle normal interest expenses and debt payments, plus he has credit lines more than enough to handle needs for newbuilds.

The issue is if ship values have dropped to a degree that banks could come and demand more CASH relative to assets and that could cause a liquidity problem..so its not operating cash flow that is the issue to me.

Shorts are thinking that banks will demand more cash to keep the equity requirements up, even though George answered the question in the earnings report that there is no issue, no banks have contacted him and he does not forsee it being an issue.

So far the shorts are winning and there is blood in the water..Ive taken quite a beating on the stock and options but I just dont see how given the credit lines, the cash and the assets the company holds how she goes under...I just dont see it.

Wallstreet -

Why would a Bank want to cause damage to a company that to this date has been current on all of their debt and interest payments?

Do they not have enough problems as it is?

Or do they have no choice?

Probably a stupid question but I have had a suckass day....who holds the loans of DRYS?? Which bank(s) are involved?

PS

Former Goldman Sachs chairman John Whitehead was interviewed. He was also Ronald Reagan's Deputy Secretary of State and a former chairman of the N.Y. Fed. He says America's problems will take years and will burn trillions.

He sees "nothing but large increases in the deficit ... I think it would be worse than the depression. ... Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S&P will announce a downgrade of U.S. government bonds."

 

Vermeer,

If you look up one of their earnings reports it lists who all the loans/lines are through. I recall that only ONE is from a US bank..I might even be wrong there, it might be ZERO US banks.

I think DB has some action with their lines of credit.

VH2, fear of the unknown is the issue..I dont see how a bank wants to buck out a company making their payments..I dont get it.

The SEC is and was headed by Bush Jr. appointee Christopher Cox. One of the President's men was the top guy at the SEC when the new Bush appointee Treasury Secretary H. Paulson ( another one of the President's men, who was at Goldman Sachs at the time)  and his criminal friends commisioned the SEC, yet again, to approve the 40 to 1 scheme, which they finally did under the Bush appointee Christopher Cox. GD, stupid,F*&^%ng  Republican crooks wrecking the whole country. Oh but now the Bush SEC has found a big crook Mark Cuban to charge him with insider trading. Yeah, Cuban is the new Martha Steward distraction from the real culprits, while the real Wallstreet Republican crooks do not get any charges (hell, they get a Republican Presidential appointment to Treasury Secretary, and a big fat taxpayer blank check, instead) from the Bush SEC, the Bush FBI, the Bush Justice Department, ect... What about the elimination of the uptick rule by the Bush SEC appointee Christopher Cox, while the US taxpayers TARP buys stock in bank stocks to trade against the now almost unlimited power of the short sellers? GD, stupid, F*&^%$ng, Republican crooks, wrecking the whole country!!! Just another day in the life of all the Republican President's men!!! Not to mention, why the hell didn't or doesn't Bush just regulate the banks to loan or not to loan. Yeah, it's so difficult for crooks to send Jane and John Doe under- qualified, over-qualified, barely qualified, small business owners, ect... and audit the findings of the loan practices of the banks with different credit scenarios. Get these banks in line with  customers and US taxpayers  needs by sending in Jane and John Doe for loans and later audits of those loans or denied loans (when appropriate). Why not? You see, The Republicans appointed under Bush Jr. (all the President's men) never watched the store, they just wanted steal from it.