What is going on at Taylor Maritime Investments?
After pushing through the merger with Grindrod (almost), the market collapsed and now they try to pick up and salvage the proverbial pieces.
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Once upon a time there was a small South African dry-bulk company that could named Grindrod Shipping. Having been discarded once by her Parent Company, GRIN was an out of favor dry-bulk Company with an enjoyable management team, a South African listing (and then a dual-US listing), some legacy shareholders, a JV with private equity, some purchase options and long-term charter-ins.
Eventually, the Company was marketed for sale and in a fierce banker run process and Taylor Maritime Investments (London: TMI) was successful in acquiring her. Or so we thought.
Taylor Maritime Investments was a new to the scene upstart from the off-spring of legendary shipping man Chris Buttery, the famous co-founder of Hong Kong’s Pacific Basin. Ed Buttery, Chris’ son, launched TMI with some support from the old man and timed his IPO to the London exchange exquisitely, raising capital and acquiring vessels as the market started to run. The stock ripped, they looked like geniuses, and everything was great.
Unfortunately, the merger with GRIN represented the market top for the share price and dry-bulk physical markets had already essentially evaporated by the time of the deal. TMI was expecting 1) the market to stay strong in 2023 which didn’t happen and 2) the complete acquisition of the Company, which also didn’t happen.
You can see how as the dry-bulk equities were trading off, GRIN stayed high on the merger before plummeting.
So fast forward to today, Ed Buttery took command of GRIN on March 31st and has had his hands full trying to find value in the Grindrod investment and deal with the debt from the merger, which while not absurd is an area they are focused on.
Since they were not able to formalize the merger, TMI now owns ~83.23% of Grindrod, per their recent filings. Given this, we are generally OK with TMI running the Company as if they own the whole thing, which they have.
Grindrod has been selling off assets, chartering some back in on TC, does no PR or reporting other than the bare minimum. But in their recent SEC filing, it was announced that Grindrod has now been forced to acquire vessels from TMI.
OK, so what does this all mean?
We are slightly annoyed on the behalf of Taylor Management. Imagine pushing forward on a deal after the market crashed and having a small minority hold-out? Then having to manage two public companies and three listings and on and on. At the time, retail favorite SeekingAlpha had an ‘ex-fund manager’ with 17k followers speaking out against the deal. I wonder how many of those shareholders held their offers down from $26 to $9? Is there a rule where SeekingAlpha must have all shipping research signed-off by J Mintzmyer?
2. There is really no reason to hold Grindrod at this point. Can you potentially get some value through the upcoming dividend and current uptick in the equity? Yes, perhaps. But you are now at the complete whim of TMI management (who is also GRIN management) extracting as much value to TMI as possible.
Poe Fratt, one of the last equity analysts left covering GRIN, put out a thorough report on July 17th saying GRIN was a buy with a PT of $12.50 (including the $2.31/share dividend). But the report didn’t imagine having to buy ships from TMI or other seemingly out of the box transactions.
Some in the market are saying TMI needs to save itself. With current leverage of 26.9% debt to gross assets, and debt to gross assets of 37.8% on a ‘look through basis’, these feel like manageable figures (*their numbers*).
Also, they reported a blended net TC rate for the TMI and Grindrod fleet of ~$12,735 per day, so they are not burning cash at these levels, they state their break-even is ~$11,700 per day across the TMI and Grindrod fleet.
But they will likely sell more vessels. We get the sense that management is a bit annoyed with the whole thing, probably wishes they never did the deal, but will make the most of it.
It has been proclaimed that we are at the beginning of another dry-bulk bull market, the fleet profile in handy and Supra/Ultramax remains very attractive, the best supply side in decades. Industry participants were even saying you don’t need demand growth just last month.
That said, Taylor Maritime remains on the London exchange with limited / choppy volume. Has a handful of hurdles trying to extract any synergies out of this deal, is looking for a COO, has to sell more ships in a falling asset market, and the market is still weak.
We are hoping Mr. Buttery at least butters the spread (if you will). With the best outcome, while likely not likely or practical, being Taylor Maritime somehow lists on an exchange in New York while consolidating and abstracting as much value from GRIN as possible. The London yield co model has clearly not been a benefit and GRIN NAV is much higher than the trading price.
The lesson here being if you are going to buy a dry-bulk Company after the market has run, do so in shares (and avoid the Johannesburg Stock Exchange). Oh and make sure you can get the whole thing!