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Pacific Basin increasing bulk carrier fleet

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Dry Bulk,

Pacific Basin Shipping Ltd, one of the world’s leading dry bulk shipping companies, has reached a conditional agreement to acquire five dry bulk vessels for a total consideration of US$104.6 million.

The consideration will take the form of:

  1. 216,903,274 new Pacific Basin shares (the vessel consideration shares” to be issued to the ships’ sellers amounting to US$46.1 million in aggregate.
  2. Cash of US$38 million in aggregate, conditionally raised through a placing of new Pacific Basin shares (the placing shares) to institutional investors, with HSBC as placing agent.
  3. US$20.5 million to be funded from the group’s cash.

The acquisition of the ships and the share placing are all conditional upon the Hong Kong Stock Exchange’s approval of the listing of the vessel consideration shares and the placing shares respectively, which is anticipated to be granted within several days.

The acquisitions relate to:

  • Two secondhand supramaxes (built 2014) for a consideration of US$34 million.
  • One secondhand handysize (built 2014) for a consideration of US$21.1 million.
  • One secondhand supramax (built 2016) for a consideration of US$23.5 million.
  • One resale newbuilding supramax (delivery due Jan 2018) for a consideration of US$26 million.

Mats Berglund, CEO of Pacific Basin, said: “These ship purchases represent attractive opportunities to grow and renew our fleet with modern, efficient vessels built by large, reputable shipbuilders Imabari and Tsuneishi. They are of the best design for our trades and will enhance our fleet for the long term. We are increasing our relatively low proportion of owned vs chartered in supramaxes at what we consider an attractive time.”

The vessel consideration shares and the placing shares will in aggregate represent approximately 9.09% of Pacific Basin’s enlarged issued share capital after the allotment and issue of all these new shares. These shares are to be issued by using the company’s General Mandate.

The secondhand vessels are currently expected to be delivered to our fleet between mid-August and end December this year.

Berglund continued: “The handysize ship we are buying is currently under our long-term time charter, so our purchase of this vessel would replace our charter cost with significantly lower operating and depreciation costs, and thus benefit our operating cash flow. The share issue and placement transactions enable immediate equity financing of the acquisitions of the five ships and will enhance our operating cash flow, EBITDA and balance sheet strength. We considered other fund raising alternatives such as secured debt financing and convertible bonds. However, while the dry bulk market is recovering, supply and demand factors remain uncertain and financing the ship acquisitions initially through equity, and not adding interest costs or repayment obligations, affords us greater flexibility in the coming years. We appreciate our relationships with the sellers and their belief in the longer-term prospects for Pacific Basin and its shareholder value. We are delighted to have secured these five excellent ships.”

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