Poor Uncle Needs Cash. What’s a Good Nephew to Do?

Our thanks to Oppenheimer’s Scott Burk for highlighting OceanFreight’s plan to issue up to $147.9 million of common shares as part of an Standby Equity Purchase Agreement with YA Global Master SPV (“YA Global”) arranged by DVB Capital Markets.

The transaction would be extremely dilutive to shareholders. If all $147.9 million of shares were sold at $3.83, the last reported price prior to the announcement, the company would have approximately 57.2 million shares outstanding which represents an increase of 208% in issued and outstanding shares.

Mr. Burk’s suggests that although these proceeds could be used to shore up the balance sheet and increase the LTV covenant cushion it is not necessary. The company’s cash flow is sufficient to cover mandatory debt repayment obligations in 2009. Furthermore, he estimates

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