NEW YORK ( TheStreet) -- DryShips (DRYS - Get Report) shares have rebounded from a selloff last week, when investors reacted to news that further dilution was coming their way from another planned notes offering.
At first, DryShips said it would sell $150 million worth of convertible notes, plus an overallotment option that would raise another $22 million. Then, on Wednesday, DryShips upped the offering by 47% to $220 million. The notes are convertible into DryShips common stock at $7.19 per share, for a total of 30.6 million shares. That would dilute the company's float (about 270 million shares) by a little more than 11%.
So why raise capital now, and dilute shareholders yet again? (Between this bond issuance and another one in November, DryShips has raised about $700 million.)
It would seem the company is attempting to give itself a bit of wiggle room. DryShips has a credit facility, syndicated by Deutsche Bank (DB), for the financing of two of the four deepwater exploration vehicles, known as drillships, that are currently on order from a shipyard in Korea (DryShips still lacks financing for the other two rigs).According to the terms of the facilities (which total about $1.13 billion, $940 million of which remains undrawn) Deutsche has the right to yank the loans if fixture rates for these vessels sink below about $500,000 a day. Because the deepwater market has come under pressure, with the most recent charter fixture fetching about $440,000 a day -- a deal made by energy exploration company Seadrill (SDRL) -- DryShips may need to renegotiate the terms of its credit agreement. In a note to clients on Friday Credit Suisse analyst Greg Lewis wrote, "While we expect