Goodbye Centerbridge Partners, hello Fidelity Investments. In another sign of gathering confidence in the duration of a dry bulk bull market, iconic US buy-and-hold investor Fidelity has become the top stakeholder in New York’s Genco Shipping & Trading. Fidelity unseats private equity’s Centerbridge Partners, which has been gradually reducing its stake this year after helping to rescue the bulker owner during a financial restructuring in 2016.
The transition at the top from a distressed-debt player to a so-called long-only institutional investor, disclosed in a securities filing on Tuesday, carries symbolic heft not only for John Wobensmith-led Genco, but for the entire dry sector as its bull run continues. “This is certainly a vote of confidence in both the likely extended duration of the strong cycle as well as the importance of having a bullet-proof balance sheet with the likelihood of paying substantial dividends,” said Jefferies lead shipping analyst Randy Giveans in a message to TradeWinds.
Genco has had a lot of changes in the first half of 2021. One has been the exit of private equity shareholding, dubbed “Prexit” by some, as longtime top holder Centerbridge sold down while two other top holders, Strategic Value Partners and Apollo Management, sold out. The second has been Genco’s shift to a low-debt, high-dividend payout model expected to take effect in the fourth quarter with first payment in 2022.
Fidelity’s filing on Tuesday indicates the Boston-based company has accumulated nearly 5m shares, or an 11.9% stake in Genco. It began building the stake in the first quarter, when it held 3.7m shares or 8.8%. The updated Fidelity holding moves it ahead of Centerbridge’s 4.88m shares and 11.66% stake. At today’s share price of about $17.90, Fidelity’s Genco stake is worth about $90m.
It is the first time Fidelity has held a reportable position in Genco since 2008, when dry bulk was nearing the end of a so-called rates “super-cycle,” a term that some bulls have applied to prospects for the current dry market.
“As we’ve been saying, the demand picture remains firm as the global economic recovery is ongoing, the supply picture is the best it has been in 20-30 years, and the micro picture is the best it has been in a decade when looking at the companies’ balance sheets, limited capex obligations, low financial leverage, and high operating leverage,” Giveans said.
“Plus, with many dry bulk companies still trading below NAV, we are bullish on dry bulk equities in the coming weeks, months and years.”
Abigail Johnson-led Fidelity had $10.4trn in assets under management as of March.