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Seaspan Insider Buys


lessthaniv
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Dennis Washington continues his insider buying at Seaspan through DeepWater Holdings:

 

http://www.sec.gov/Archives/edgar/data/1206860/000119312509178760/dsc13da.htm

 

Roughly another 220,000 shares around the $6.30/share mark. He now owns about 10.4% of the shares which is up from his 5.2% ownership in Dec/2008. He has roughly doubled down to date.

 

Disclosure: Long SSW

 

<IV

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Less than IV, thanks pointing out the increased purchases.  It caught some eyes cause the stock was up 4% today.

 

  Im curious as to your 220,000 increase in shs. The 13-D's show around a 675K increase from 3/31 to 6/30.

 

Thanks, Gary

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The 220 k purchases were done in mid August. 

 

1.375 Million spent by Mr. Washington in August. 

 

They look very committed to the stock and the dividend at the present price is still about 6%. 

 

The last report indicated that they have delayed some of the ships for a small price.  They had been asked by a couple of their minor carriers to drop the rental prices but declined.  The major carriers have not made any similar requests. 

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Hi Gary,

 

Yes, the 220k that I was referring to were the August purchases only. The total shares bought since Dec/08 is roughly 3.5M.

I was delighted to see conviction in the form of open market transactions from the Washington's who are also involved in the recent $200M financing.

 

<IV

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Best way to describe it:

 

They are the GE Capital Fleet Services of the ship rental business.

 

They have the ships built, lease them to pre-booked clients for long lease terms, and collect the cash.  It's a good business as long as your clients are reliable and Seaspan leases mostly to Asian clients of good reputation. 

 

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I would agree that Seaspan is the gold standard in the container ship lease side, but they are not out of the woods quite yet. However, if one takes a much longer term view of say 2-3 years, this one may have good times ahead. This view is somewhat tempered and balanced by the possible chance deflation aspects though. Also, all Seaspan's customers are having extreme difficulty, but are still currently paying the bills on time. -- Long Seaspan

 

 

Cheers

JEast

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Those of you who are interested in Seaspan may also want to look into TAL International (TAL), which is one of the largest container leasing companies in the world.  They also try to match the duration of debt to the duration of their leases. 

 

Their lease terms are very correlated with the price of containers, and there is currently a glut of containers on the market, so their average rental rates are decreasing and probably will continue to decrease over the next year or two.  Still, TAL has recognized this, cut the dividend, and is deleveraging its business at the moment.  Management has also been using the current environment to retire debt at nice discounts to face value.  Bruce Berkowitz used to own quite a bit of this company, sold most of his position last year, and increased his position as of his last SEC filing.

 

I haven't looked into Seapsan yet, but TAL might be a little bit more lower risk if more shipping companies start running into financial problems because it should be easier for them to right size their business by reducing container purchases.

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Also , I have copies of the original posts on SSW but not sure how to post them here.

There is a lot of info and it would be a very large post if I copied and pasted.  

 

I'll try to post the url's.

file:///Desktop/CORP.%20NEWS/Seaspan/Berkshire%20Hathaway%20Shareholders-SSW2.webarchive

file:///Desktop/CORP.%20NEWS/Seaspan/Berkshire%20Hathaway%20ShareholdersSSW1.webarchive

There see if that works if not I can paste the messages into another post

 

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Yet more buying through the end of August by Dennis. He is now at 11.8% ownership.

 

http://www.sec.gov/Archives/edgar/data/1206860/000119312509184752/dsc13da.htm

 

Schedule A

 

Purchase Transactions of Common Shares

 

By Deep Water Holdings, LLC during the last 60 days

 

 

 

       

Date

  Transaction

  Number

of Shares

  Approximate Price

per Share

 

August 11, 2009  BUY  25,406  $ 6.31

   

August 12, 2009  BUY  43,053

  $

6.36

 

   

August 13, 2009  BUY  41,500  $

6.40

 

   

August 14, 2009  BUY  63,100  $ 6.37

   

August 17, 2009  BUY  46,000  $ 6.20

   

August 18, 2009  BUY  64,100  $ 6.29

   

August 19, 2009  BUY  100,000  $ 6.29

   

August 20, 2009  BUY  78,600  $ 6.33

   

August 20, 2009  Acquisition under dividend reinvestment plan  110,071  $ 6.33

   

August 21, 2009  BUY  111,000  $ 6.45

   

August 24, 2009  BUY  125,000  $ 6.45

   

August 25, 2009  BUY  128,518  $ 6.53

   

August 26, 2009  BUY  81,990  $ 6.53

   

August 27, 2009  BUY  100,000  $ 6.70

   

August 28, 2009  BUY  73,200  $ 6.90

 

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I was doing some investigation tonight into the recent filings by Dennis Washington. I found it interesting that Dennis was filing a 13D form instead of 13G forms (which I'm more accustomed to seeing) when reporting his holdings.

 

(from investopedia):  To be able to file a 13G instead of a 13D, the party must own between 5% and 20% in the company. It must also be clearly understood that the party acquiring the stake in the company is only a passive investor, and does not intend to exert control. If these criteria are not met, and if the size in the stake exceeds 20%, a 13D must be filed.

 

I wonder if Dennis is looking to take this private?

 

<IV

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That could be? I'm really not sure what the rules are here with 13G's and 13D's. I'll keep digging as I'm interested in learning. I can't recall if the preferred's have voting rights or not? I'll check. If they do, then you may have it correct. If they aren't voting then I would question this more as I would think only voting shares over 20% would matter.

 

If anyone happens to be a corporate lawyer and can help pls do.

 

<IV

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Gaf63,

 

I think you have got it correct. Here is the link to the 6-k:

http://www.sec.gov/Archives/edgar/data/1332639/000119312509016540/d6k.htm

 

Excerpt:

 

In general, the holders of the Preferred Shares will be entitled to vote together with the holders of the Common Shares on an as-converted basis on any matter submitted for a vote of Common Shares. In addition, the holders of the Preferred Shares, voting as a separate class, will have the right to approve any future issuance of senior or parity stock (except that the Company may freely issue additional Preferred Shares up to an aggregate amount of $115 million), any redemption of the Company’s capital stock, any amendment of the Company’s articles of incorporation, bylaws or the Statement of Designation or any share exchange, reclassification, merger, consolidation, liquidation, dissolution, asset sale or other disposition of all or substantially all of the assets of the Company. In addition, subject to certain exceptions, the holders of the Preferred Shares have preemptive rights to prevent dilution and the right to elect up to two members of the Company’s board of directors. A copy of the Statement of Designation is filed as Exhibit 3.1 to this report.

 

On an "as converted basis" a $160M would represent about 10.67M shares. Together with common shares recently purchased I believe Dennis has just exceeded the 20% threshold so it now makes sense that the 13D was filed.

 

Thanks for helping think that through. My mind got stuck.

 

<IV

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Last but not least (at least for today).

 

Seaspan sucessfully took delivery of their fortieth charter ship on Aug 31. Press release below:

 

Gone now for a nice labour day long weekend,

 

<IV

_______________________________

 

Seaspan Takes Delivery of Fortieth Containership

 

 

2009-09-04 17:51 ET - News Release

 

HONG KONG, CHINA -- (MARKET WIRE) -- 09/04/09

 

 

Seaspan Corporation (NYSE: SSW) announced today that it accepted delivery of the MOL Eminence from Hyundai Heavy Industries Co., Ltd. on August 31, 2009. The 5100 TEU containership is Seaspan's fifth newbuilding in 2009 and expands the Company's fleet to 40 vessels. The MOL Eminence is chartered to Mitsui O.S.K. Lines, Ltd. under a twelve-year, fixed-rate time charter that requires MOL to pay all fuel, cargo-operating and related costs.

 

Gerry Wang, Chief Executive Officer of Seaspan, said, "The MOL Eminence represents the fifth vessel we have taken delivery of in 2009 and fortieth overall. We continue to execute our business model and have further expanded our sizeable contracted revenue stream derived from major liner companies primarily based in Asia. Upon delivery of our full fleet of 68 vessels, Seaspan's contracted revenue stream is expected to grow by about 218% to approximately $7 billion and its annual revenue is anticipated to rise about 145% to approximately $700 million."

 

 

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New SEC Filing out today dated showing more buying right up to September 9th.

 

Dennis picked up another 600K shares in September thusfar: Now owns 12.81% of the common and upon conversion of the preferred shares he will have substantially more. If you follow the dates, Dennis has bought stock every day the markets have been open since August 11th. The only days no transactions occurred where on Sat/Sun/Labour Day.

 

Disclosure: Seaspan is my largest holding.

<IV

_______________________

Schedule A

 

Purchase Transactions of Common Shares

 

By Deep Water Holdings, LLC during the last 60 days

 

 

 

       

Date

    Transaction

    Number

of Shares

    Approximate Price

per Share

 

August 11, 2009    BUY    25,406    $  6.31 

   

August 12, 2009    BUY    43,053

    $

6.36

 

   

August 13, 2009    BUY    41,500    $

6.40

 

   

August 14, 2009    BUY    63,100    $  6.37 

   

August 17, 2009    BUY    46,000    $  6.20 

   

August 18, 2009    BUY    64,100    $  6.29 

   

August 19, 2009    BUY    100,000    $  6.29 

   

August 20, 2009    BUY    78,600    $  6.33 

   

August 20, 2009    Acquisition under dividend reinvestment plan    110,071    $  6.33 

   

August 21, 2009    BUY    111,100    $  6.45 

   

August 24, 2009    BUY    125,000    $  6.45 

   

August 25, 2009    BUY    128,518    $  6.53 

   

August 26, 2009    BUY    81,990    $  6.53 

   

August 27, 2009    BUY    100,000    $  6.70 

   

August 28, 2009    BUY    73,200    $  6.90 

   

August 31, 2009    BUY    77,100    $  6.73 

   

September 1, 2009    BUY    119,500    $  6.70 

   

September 2, 2009    BUY    95,139    $  6.70 

   

September 3, 2009    BUY    83,300    $  6.88 

   

September 4, 2009    BUY    100,000    $  6.98 

   

September 8, 2009    BUY    100,000    $  7.21 

   

September 9, 2009    BUY    100,000    $  7.27 

 

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The following alarmist article suggests overcapacity.  Is this significant to your thesis?

http://www.dailymail.co.uk/home/moslive/article-1212013/Revealed-The-ghost-fleet-recession.html

The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination  -  and is why your Christmas stocking may be on the light side this year

The 'ghost fleet' near Singapore

http://i.dailymail.co.uk/i/pix/2009/09/08/article-1212013-06435781000005DC-710_634x403.jpg

The 'ghost fleet' near Singapore. The world's ship owners and government economists would prefer you not to see this symbol of the depths of the plague still crippling the world's economies

 

-O

New SEC Filing out today dated showing more buying right up to September 9th.

 

Dennis picked up another 600K shares in September thusfar: Now owns 12.81% of the common and upon conversion of the preferred shares he will have substantially more. If you follow the dates, Dennis has bought stock every day the markets have been open since August 11th. The only days no transactions occurred where on Sat/Sun/Labour Day.

 

Disclosure: Seaspan is my largest holding.

<IV

 

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Hi O,

 

Here are the Coles Notes …

 

I have had several conversations with colleagues about Seaspan and the common question that I receive is exactly yours. What about the oversupply of container ships? There is no doubt the industry is currently faced with an oversupply of ships. The oversupply coupled with weakening foreign trade has caused the spot charter rates to fall to the floor. But ... while concerning ... this is not central to my thesis because Seaspan has built in growth for the next several years and those charters were established prior to the market malaise when charter rates were much more favorable.  Currently, Seaspan has about $7B in contracted revenue.

 

In fact, Seaspan was founded by CEO Gerry Wang in the 1999 Shipping crisis. He used the market conditions successfully to acquire ships on the cheap and then subsequently charter them out on long term charters. Today Seaspan has a total of 68 ships in their fleet. 40 of those ships are floating and generating charter revenue. The remaining 28 ships are currently being built with various finish dates scattered throughout the next couple of years. As those ships become deliverable, Seaspan's revenue (as noted above), EBITDA and distributable cash will all rise accordingly. (They are working with the ship builders and the liners to extend some of the delivery dates given the large overcapacity.)

 

Today; EBITDA = $200M

Distributable Cash = $140M

 

Upon completion of the 68th ship;

 

  EBITDA = $500M

  Distributable Cash = $300M

 

 

Seaspan has been quite conservative in that a long term charter is secured concurrently with agreeing to build a new ship. I would have to check the date to be sure but I believe (from memory) they haven't written a deal for a new ship since late 2007.

 

This picture above would be concerning to Seaspan when assessing counterparty risk. However, ships sitting in the water are the liners problem, not Seaspan’s. It doesn’t matter to Seaspan if the liners are using the ship or not. Seaspan still gets paid if the ship is ready to be used. The only times when they don’t get paid are when the boat has mechanical issues or during off-hire periods. Having said that … Seaspan has a historical utilization rate of 99.1%. Last quarter utilization was 99.9%. Outstanding.

 

A few more bullets:

 

• Seaspan secured all there debt financing in 2007 prior to the credit crunch. Their revenue base is largely Chinese and has allowed them to work successfully with Chinese banks to finance many of the new builds.

• Debt has been SWAP’d out give the company cost certainly. 6.1%

• Seaspan’s leverage is less than the industry. Many lessors will go to 80%-90% leverage. Seaspan has an internal target that they have managed to maintain of 65%. This has required them to raise some equity capital though.

• They have successfully raised $1.7B in capital since the IPO over 6 financings

• That capital has been successfully invested to provide shareholders with cumulative dividends of $6.29/share which by the way is close to my ACB!!

• Seaspan is the largest provider of container ships into China given their close relationship with COSCO/China Shipping. The Chinese government which backs COSCO/China Shipping has very low exposure to ship coming in/out of Chinese ports. Especially compared to other countries. They are expected to grow significantly over time to increase this which should benefit Seaspan.

• Since their IPO they have gained the most market share of any of their competitors.

• SSW has very motivated and dedicated sponsor that make me worry much less about the equity financing. See my previous posts about the Washington’s.

• Right now roughly 70M shares exist. Upon conversion of the preferred’s the company will have about 100M shares. They have stated equity needs of $180M - $240M by 2011. If you take the high end together with today’s market price, that will constitute another 27M shares. So, upon completion of the new builds we are likely to see dilution take the share count to somewhere around 130M. Put that share count up against $500M EBITDA and $300M in distributable income. Then consider that SSW will no longer need to fund their newbuilds organically. So, the dividend will likely rise back. Prior to cutting the dividend the company distributed $1.90/share. They should exist this period with about $2.30/share in distributable income based on my back of the envelope numbers.

• While you wait for this story to develop you get paid about 5% in current dividends.

 

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