DryShips to draw down on $370 million facilities; Ocean Rig loan OK’d

By Susanna Moon

Chicago, Nov. 19 – DryShips Inc. said it expects to draw down on its $170 million senior secured credit facility and $200 million secured bridge loan facility in the upcoming week.

The company signed the Nordea $170 million facility on Oct. 29 and ABN Amro $200 million facility on Nov. 14, according to a company press release.

In connection with the ABN Amro facility, as required by that facility, Ocean Rig filed a prospectus supplement Tuesday covering up to 78,301,755 of its common shares held by DryShips or its pledgees.

Of the shares registered, an estimated 44 million Ocean Rig shares will initially be pledged by the company to ABN Amro under the terms of the facility that requires three times collateral coverage based on the prevailing 30-day VWAP at drawdown.

Ocean Rig loan

On Tuesday, Ocean Rig’s $120 million loan to DryShips was approved by a special committee of Ocean Rig’s board of directors, which received a fairness opinion from Global Hunter Securities, a division of Seaport Global Securities LLC, and the loan agreement was executed by both companies, the release noted.

The loan is for 18 months, is unsecured and bears interest at Libor plus an average of about 1,000 basis points for the first year and 1,200 bps for the following six months.

Ocean Rig has the option to exchange this loan for Ocean Rig common shares owned by DryShips at a fixed price of $13.50 per share, provided the ABN Amro facility has been repaid in full.

If the exchange occurs, the margin of the Ocean Rig $120 million loan will be reduced from inception to Libor plus an average of about 660 bps for the first year and 825 bps for the following six months.

Convertibles coming due

The company also said it repurchased $191.09 million principal amount of its 5% convertible notes on the open market.

The outstanding principal balance of the 5% convertibles due on Dec. 1 will be $508.91 million.

Backstop for convertibles

The company said on Oct. 20 that its majority owned subsidiary, Ocean Rig UDW Inc., agreed to provide DryShips with $120 million of liquidity through a short-term unsecured loan.

Proceeds may be used, if needed, to repay the company’s 5% convertible notes due Dec. 1, 2014.

DryShips “fully expects to fund the Dec. 1 maturity of the 5% convertible notes, and the loan from Ocean Rig is just a backstop in case we need a bit more time to execute on the various alternatives we are working on and if drawn, will be repaid as soon as possible,” George Economou, the company’s chairman and chief executive officer, said in a previous company press release.

DryShips is an Athens-based owner of drybulk carriers and tankers.

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