DryShips opted to stay afloat at the expense of common shareholders, issuing 250 million new common equity shares today at $1.40. The struggling owner of dry bulk ships, oil tankers and drillships has a $700 million convertible note due December 1, 2014. DryShips originally attempted to float $700 million in debt to pay off the bond, but was unsuccessful in placing the issue. With only a few options left, DryShips opted for the equity offering, diluting existing shareholders by some 55% rather than negotiating with the convertible bond holders for a sweetened deal with a substantially reduced conversion price and an extended maturity.
In combination with about $350 million in previously arranged bank loans, the market now seems confident that DryShips will be able to pay off the convertible bonds on time and the bonds are trading close to par.
While DryShips dodged a bullet in this round, it hardly seems smooth sailing as charter rates are well below last year and many believe the offshore drillship market has peaked, with the risk of drillship oversupply on the horizon.