A 10.3% Yield From A Shipping Company With Massive Insider Buying: Star Bulk Carriers Notes

Star Bulk Carriers Corp (Nasdaq: SBLK) is a large shipping company focused on the dry bulk sector. SBLKL is the company's exchange traded debt issue. Star Bulk Carriers has been taking advantage of the shipping downturn to pick up market share from weaker competitors. The company has raised over $400 million this year to help fund their expansion program while ensuring that balance sheet leverage remains at a moderate level. Insiders participated heavily in both capital raises.SBLKL is a par $25 unsecured debt issue maturing on 11/15/2019. It has an 8% coupon and interest is paid quarterly. At a recent price of $23.22, SBLKL is trading at a yield to maturity (calculated in my Excel model) of 10.3%. SBLKL can be called at par starting on 11/15/2016 or sooner if the company is acquired. See prospectus for additional details.SBLKL's 10.3% YTM is quite attractive given the company's strong balance sheet and heavy insider participation in recent capital raises. $242 million of equity capital was raised in a 1/14/2015 equity public offering. Of the 49 million shares that were sold, 37 million were purchased by 4 large shareholder groups including an entity controlled by CEO Petras Pappas. An additional $176 million was raised from another equity public offering on 5/18/2015. Almost three-fourths of the shares sold were again purchased by the same 4 shareholder groups, including the friends and family of Petras Pappas. As per page 5 of the company's May 2015 investor... Read more