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If that is the case then Dianna Containership (DCIX) should be going bankrupt too. Their banks are forgiving loans and their management is also scrapping ships at 6 Million dollar scrap values. This is happening all across the industry, not just to Box Ships. As off today, Dianna Shipping is still trading at a 48 Million Market Cap while Box Ship has a value of a little over a Million.
Compare two Greek Container Shipping companies: Box Ship vs Dianna Containership and tell me what is the better value?
BOX SHIP (TEUFF)
Industry: Container Shipping
Estimated Market Cap: 1.39M
# of Ships in Fleet: 6
Estimated Debt: 100M
Today's Price" $0.015
Outstanding Shares: 93M
DIANNA CONTAINERSHIP (DCIX)
Industry: Container Shipping
Estimated Market Cap: 46.2M
# of Ships in Fleet: 12
Estimated Debt: 191M
Today's Price" $5.25
Outstanding Shares: 9.36M
Question: Why is Dianna Shipping trading at 33 times the value of Box Ship?
Both are scrapping older ships, they cash holdings are similar, both are working with the banks on their debt forgiveness. It seems that DCIX is now where Box Ship was a years ago.
In April of 2016 Tradewind Magazine wrote an article spreading false rumors about Paragon Shipping filing for bankruptcy. Management sued them for defamation and the stock rose several 100% overnight. I don't see any bankruptcy in the 30 years of history of this management on any shipping company they managed. If bankruptcy would be on the horizon, banks would not forgive outstanding loans nor would they delay payment obligations into 2017.
http://splash247.com/paragon-delays-kamsarmax-deliveries-rearranges-loan-sues-for-defamation/
Today's news is exciting and very good news for Box Ship and the entire industry. These are not deals made by companies that are on the verge of bankruptcy. Management seems to be making some very smart moves. Today's news shows me that the banks are continuing to work with Box Ship and also with many other shipping companies across the industry. Banks need to forgive some of the debt in exchange for companies scrapping old ships. By the time management is finished with their bank negotiations, they will emerge as a financially stronger company with a small but new fleet and little debt left. This is what you do to survive hard times.
I agree, the biggest concern about the future of Box Ship has to do with their idle fleet. If they can't rent out their remaining ships soon, they will be in big trouble. Even the three ships that are sill under contract are about to come off. My concern is that the Hanjin bankruptcy has created a new fear in the market where customers are afraid to do business with distressed shipping companies.
TA, How come the banks are not foreclosing on Dianna Containership? Take a look at the fleet employment table that shows their old rates that have now expired and the new rates. (17-20K per day vs 5-6K per day) Look at their November press releases. They are also scrapping newer ships for 6.6M each yet they carry their fleet of 12 ships for 385 Million on their books. The book value should be 85M. They also have 120M in debt yet the banks are also allowing them to postpone their debt payments. However, DCIX trades at a market cap 21 times higher than TEUFF. It looks to me that the bank are working with Greek Shipping companies to reduce their capacity while helping them to survive this downturn. Rates will eventually go back to the 20K or higher per day rates in a few years and then the asset value of their fleets will be back closer to what they have on their books. Reducing capacity in the shipping industry is in the best interest of shippers and bankers. TEUFF is trading so low for two reasons:
1) The toxic financing deals they accepted increasing outstanding shares from 34 Million to over 100M
2) Management's lack of communication creating distrust
Here is the Dianna Shipping fleet employment table with daily rates that is telling the story:
http://www.dcontainerships.com/our-fleet/fleet-employment-table/
DCIX is now where TEUFF a few months ago. They just had the benefit of higher rates lasting a little while longer.
Just my humble oppinion
Box Ship is not the only one selling ships for scrap....
http://www.marinelog.com/index.php?option=com_k2&view=item&id=23854:bimco-box-ship-demolition-at-all-time-high&Itemid=231
The six ships that were sold in March of 2016 were worth much less than the outstanding loans. My recollection is that the bank agreed to take market value for the ships and settle the loan.
Here is another example of a bank waiving a loan with Paragon Shipping as per their press release from June 16, 2016:
".... the Company was discharged from all of its obligations under the loan agreement, including a waiver of the outstanding debt amount of $8,317,750, in exchange for the payment of interest in the amount of $50,000...."
https://finance.yahoo.com/news/paragon-shipping-announces-waiver-debt-104800265.html
If that is the case why did they forgive the debt on Paragon Shipping's fleet in March of 2016?
I agree with you. This is all about cutting expenses and renegotiating loan terms with the banks. I do not foresee bankruptcy in the cards. This CEO has not filed for bankruptcy once in his 35 years of history.
The banks at this point have no other choice than to forgive large portions of this outstanding debt. They also have a vested interest to get the supply and demand problem under control. There are over 5,000 other greek ships on the oceans that carry 'over inflated' mortgages in excess of 400 Billion dollars. At today's rates, the banks maybe able to recover 10%. Are you proposing that the banks should force the entire Greek Shipping Industry into bankruptcy?
In terms of the Preferred Shares. Yes, they will eventually have to pay the accruing dividend but there are only 916,000 outstanding shares and 25% are owned by the CEO of Box Ships.
Look what the sister company Paragon Shipping did back in March of 2016. (See press release below). If history is an indicator, than Box Ship sold these 4 ships with agreement of the banks to settle the outstanding loans. If this is the case, than I would consider this really good news. A potential scenario could be that they decide to also sell the remaining 2 ships that were built in 2007 and keep the 3 that were built in 2010 and then they emerge with 7 to 10 Million in annual revenue based on today's rates but with very manageable debt on the 3 remaining vessels.
Paragon Shipping Press Release from 9/3/2016:
..."On March 9, 2016, the Company agreed with the syndicated banks, subject to certain conditions, to sell the mortgaged vessels, namely the M/V Coral Seas, the M/V Golden Seas, the M/V Prosperous Seas, the M/V Precious Seas, the M/V Priceless Seas and the M/V Proud Seas, to unaffiliated third parties in exchange for the full and final settlement of the outstanding amount of the respective facility...."
Put yourself in the shoes of the banks that carry all the bad loans in the Greek shipping industry. Over 400 Billion dollars of bad shipping loans are on the book of the banks. Many of these loans were funded in 2006 when ships rented out for 100,000 a day and the value of a contracted vessels were in excess of 100 Million. Today these same ships are scrapped for 6.5 Million even though they still have another 10 years of life. These banks are in just as deep of a mess than the shipping companies. They have to work together to get through this low. I think it is in the best interest of all parties to hunker down and wait out this storm. It makes no sense for banks to force these companies into bankruptcy. Banks will have to forgive some of the debt and it probably makes sense that the shipping companies scrap some of the non performing ships to lower supply which eventually will raise prices.
The bottom line here is very simple. There either will be a merger and the price will go through the roof or this stock will be worthless. In the meantime as we all wait for the anticipated news to hit the wire, the price of the stock will keep jumping up and down 25% between the current Bid and Ask on very low volume. At this point the current trading price matters little. A single order of 100 shares placed at the Ask price can make this baby move up 25%.
Does anybody know why the Box Emma is still sailing near the cost of India? I thought this vessel was retired for scrap.
http://www.marinetraffic.com/en/ais/details/ships/538004424
We know that the CEO already holds 208,000 shares of TEUCF. That represents almost 23% of the outstanding shares. There are only 916K outstanding. What would prevent the CEO or one of his affiliate companies (Neige, Paragon, AllSeas...etc) to buy more TEUCF shares on the grey market for $2.50. TA said himself that the "Grey Sheets' are completely unregulated. He would then reap a 100% dividend annually and get back 10 times his money when the shares are called. Not a bad deal.
My original question was if he an insider can get away with buying or selling preferred shares on the grey sheets without having to file an SEC form?
FYI: I had 8 buy orders for TEUCF filled in the month of September and one in the month of October 2016. You just have to call your broker first, have them call the trade desk and ask for a specific number of shares that are available to buy and get the exact ASK. Then place your order online and it should clear. What I have noticed however is that the price does not always reflect the last transaction. The lowest price I was able to get so far was $2.50.
...."Some companies choose be listed or traded on in these sheets or remain on these sheets.
If a company chooses to be traded on these Sheets, then the shares are many times held privately by management, employees and others associated with the company. Such stock is traded privately between these stock holders. "....
I have a feeling this is by choice!
I don't think they are playing games. The problem is that the preferred shares are listed on the OTC Grey Market and not on the standard OTC. Every security that has less than 1 Million shares outstanding automatically gets listed on the Grey Market during the delisting process. This market is all based on manual executions and little or no rules. I have had buy orders open almost every day and they rarely execute. You really need to call your broker and have them call multiple market makers to find out whose is selling how much at what price. I have had orders as high as $7 that did not clear online. Then I call the broker and once in a while they do clear but then new price is not being reported.
I would not recommend that you buy these securities on unless you are willing to hold them until they are called. This is very difficult to sell once you own it because there is hardly any liquidity.
I went through past SEC filings and it looks like Michael Bodouroglou, the CEO of Box Ships, owns a private trust company called Neige International Inc. that bought 5 Million dollars worth of the TEUCF preferred shares at the original offering price of $25. Today he still owns 208,333 shares of TEUCF and 4,121,261 of TEUFF. His 4 Million common are now less than 4% of the company but the preferred still represents 25% of the outstanding shares. I am sure he has some vested interest to get a large portion of his $5 Million back even in a liquidation scenario.
I also don't think that the $2.25 current trade price of the preferred represents the true value since higher priced transactions have not been reported accurately and this low price has mostly been cause by to very low volume panic sales after the delisting to the grey market.
Here is the link to the original prospectus.
https://www.sec.gov/Archives/edgar/data/1504795/000119312513303553/d567831d424b5.htm
TA, what is your take on the preferred shares (TEUCF)? In case the banks do force the company into bankruptcy by calling the loans, do you believe that there will be money left to pay the preferred shareholders the $25 per share plus 2016 accrued dividends of $2.25 per share? TEUCF is currently trading at a 90% discount to PAR. Do you think there is hope to recover any of the moneys?
Does anybody know why 3 of Box Ship's vessels haven been anchored in front of the harbors of SCHINA - South China and Hong Kong for several weeks now? Are they off contract or does this have anything to do with the Hanjin bankruptcy?
You already have some of the news! 2015 they had 9 ships under contract with Maule being rented out at $38,000 per day and two other ships at 19K per day. Today they have a fleet of 6 ships with only 3 sailing and revenue per ship is around 6K per day. Based on this info you can see that 2016 will be a lot worse.
The buyback period ended yesterday.
ATHENS, Greece, September 29, 2015 – Box Ships Inc., (NYSE: TEU), or the Company, a global shipping company specializing in the transportation of containers, today announced that its Board of Directors has approved a share repurchase program for up to 10% of the Company’s common shares outstanding during the twelve-month period ending September 29, 2016.
According to the Box Ships web page only 3 ships seem to be contracted out and the other three are currently anchored somewhere in China and have not been sailing for a while.
Right, it's a real bargain....
Based on the last 2004 built ships sold for scrap we can now safely assume that the current assets including cash can not be much more than 60 Million...
Subtract from that....
121 Million in Debt
25 Million in outstanding Preferred Shared Obligation
5 Million in outstanding preferred dividends....
and you can see what a screaming buy this is...
My I remind you that the preferred shares trade at $2.06 which is a 92% discount of the the $25 Par value that the company is obligated to pay. The preferred is accruing $2.25 per share dividends per year which the company is obligated to pay before any common shares receive any value...
Does anybody know if Box Ship is allowed to purchase back their own preferred shares on the open market without SEC filing?
I am trying to find a logical reason as to why Box Ship's management decided to move the preferred shares (TEUCF)to the OTC Pink Sheets (Grey Market) and not on the much more liquid and regular OTC where the common is trading?
1) It is an unregulated market with no rules.
2) Market Makers can do whatever they want
3) There are no visible BID and ASK prices
4) Last trade prices are often not reported thus making price quotes completely unreliable
5) Front running is common due to the manual nature of the market.
6) It is extremely difficult if not impossible to buy and sell.
7) Most self-directed corporate 401K accounts restrict investors from purchasing stocks from the grey market OTC
I have a hunch that Box Ship may derive a benefit from doing this. What if their strategy is to buy back their own outstanding preferred shares for pennies on the dollar thus ridding themselves of a huge financial future obligation.
If you have 1 Million of outstanding preferred shares with an obligation of $25 Million dollars plus annual accruing dividend of $2.5 Million, wouldn't it be in the best interest of the company to buy back as many shares as they can?
Any ideas?
I did not know that. Interesting. Thanks for sharing. BTW, I went to the tracking site you recommended and they also list both the Box China and Box Hong Kong listed as decommissioned.
Where did you get the info that the two sold ships are still sailing. Box Ship's web page only lists 7 ships in their fleet.
FYI, below is a link that I use to monitor container ship rates. This is the Harper Peterson Index which I have found reliable over the years. The index is updated once a week. According to their info, container ship rates are still on the decline. Take a look:
http://www.harperpetersen.com/harpex/harpexRH.do?timePeriod=Years2&&dataType=Harpex&floatLeft=None&floatRight=None
I don't quit agree with the calculations posted on the TEUFF board. Remember that in 2015 and 1st quarter of 2016 Box Ship still had a contract for the Maule at $38,000 per day. That contract expired in March of 2016 and now the ship at current rates may be bringing in $6,500 a day. The market value of these ships depends very much on the going rate. They also had the two older ships contracted for around 19K per day which are now sold. I think the Net Assset Valuation (Mark to Market) is not much above break-even at these rates. Once the rates recover and go back to where they used to be, then a valuation of $0.70 is low.
I agree with your assessment to some extend. The common share price as off today values Box Ships at around 2.3 Million which I think is too low. I do agree that the main reason for this to not trade higher is the hidden fear of outstanding toxic shares and the possibility of more toxic notes in the future. The good news is that no matter how many toxic notes they issue, it will not negatively impact the preferred. It may even help the preferred because it improves the cash position while diluting the common.
I personally think the preferred is the better bet because the upside is 6-1/2 times today's value of $4 plus a nice 50% annual perpetual dividend that accumulates even though it is not paid right now. If you believe that the company still has 2.3 Million in actual value, the preferred should be trading at $25. I am not so sure that the the common shares have more upside. I have a hard time justifying a valuation of 13 Million (6-1/2 times 2.3 Million). My estimate for Box Ships 2016 revenue is 21 Million with a 5 Million EBIDTA loss. For 2017 I can only come up with 15 Million in revenue if rates stay where they are at now. The real recovery I don't expect until 2018.
The only reason the preferred is trading at $4 is because of the Grey Market environment that allowed very few low volume transaction of panic sellers drive the price so low. The difference between the BID and ASK is so huge that a 100 share transaction can cause multi dollar price swings. Unfortunately there are not many sellers left. If have tried buying this as high as $10 and couldn't clear.
The only risk for the preferred is bankruptcy and liquidation and even then I believe that you are better off with the preferred. Just my humble opinion.
I believe that the preferred shares have lower priority than bank debt but higher priority then the common shares.
The company should be able to survive the next two years at these low rates but ultimately shipping rates need to get back to at least 10K per day per ship for the company to return to health. Right now rates are around 6K.
What I can't understand is that other Greek container shipping companies of similar size with similar fleets and financials are still trading at much higher valuations and their preferred share are trading close to par. These companies are facing the same head winds but for some reason the market values them much higher. Examples are the common and preferred shares of Diana Containership. (DCIX and DSX-B). Market Value around 34 Million and preferred trading at $15.
Good summary, MB! A couple of additions to your post. There are approximately 916K outstanding shares of TEUCF. As you said they pay dividend of 9% if you buy the share at $25. If you manage to get in at around 4, the annual dividend is over 50%. The last dividend they paid was in January of 2016. Even though the board suspended the dividend, it is still accumulating at a rate of $2.25 per share for each year. Like you said, if the company should liquidate, they have to pay out all 916,000 preferred shares at $25 plus the accumulated missed dividends.
I believe that the CEO owns a large portion of the outstanding shares and has a vested interest in getting paid himself.
This is not a stock to trade. This is only a buy and hold opportunity betting on the survival of the company. My time horizon is 2 to 3 years. Once you are in, it is hard to get out. When Box Ship was delisted, the common went to the regular OTC Market which is much easier to trade. Because TEUCF had less than 1 Million outstanding shares, the symbol was delisted to the OTC Grey Market which makes it very hard to trade.
Box Ship will have to face lots of head winds in the next 2 years but with the sale of the 2 ships they have enough cash to survive. I also think that once they reinstate the dividend and move the stock to a better trading environment, this will jump back to the par value of $25 per share.
Has anybody noticed a pattern with TEUFF in regards to Buy and Sell Limit Orders on the OTC Real-Time Level 2 Quote Screen?
I have noticed that market makers seem to hide any larger BUY orders but seem to show every SELL order. It maybe a naive question but what is the purpose of Level II quotes if market makers have the ability to hide or show orders of larger volume?
Don't forget that the CEO holds the majority of the 916K preferred shares. I am sure he would like his dividend paid and get his $25 back.
I have a feeling that the CEO will buy his 5% of the common before the end of September (according to his announcement). Reverse split will only make sense if that gets the stock back on NASDAQ. I am not sure how realistic this is in the near future.
With the sale of the 2 ships netting 13 Million I wouldn't be surprised to see the dividend for TEUCF being reinstated and the convertible note of 250K from Kyros to be paid off. Either way the dividend is accruing. With such an announcement, i suspect the price of the preferred to jump back up to $25.
Great points. Thanks TA!
"The cost of shipping is now jumping through the roof and carriers are filing requests for a full increase in rates from Sept. 1," said Paul Tsui, managing director of the Janel Group in Hong Kong, a freight forwarding and logistics firm.
From the article TA posted....
http://in.reuters.com/article/hanjin-shipping-debt-idINL3N1BD5HY
One of the news articles I read mentioned 70 container vessels. The webpage overview section of Hanjin mentions 105 (not including bulk)
Just saw similar article on the LA Times. (see link below)
Apparently Hanjin had 70 container vessels and the ports are concerned that they will not get paid so Hanjin customers are searching for alternative shippers. I am hearing unconfirmed reports that this event has caused shipping rates to jump overnight.
http://www.latimes.com/business/la-fi-hanjin-bankruptcy-20160901-snap-story.html