GMR Email Oct 6, 2008

This is an email I sent to friends and family on Oct 6, 2008 concerning GMR. I will try to figure out if I can backdate or achive these previous emails.

As you all prolly know GMR has been tanking along with the other tankers out there. It is down about 50% in 2 months, yet nothing has changed from a financials perspective. It is getting hit with oil, although the lower oil prices are actually better for the company since that is its largest expense (Duh! It's a tanker!).

What you may not know is GMR announced a merger on August 5th that looks pretty attractive. I have put together a summary of what's going to happen, but all in all existing GMR shareholders will get 1.34 shares in the new company. The big news out of the deal is that the combined company will keep its $2.00/share dividend. I missed this when I glanced over the news report in August. See the spreadsheet attached.

The new company will have roughly $57MM shares outstanding. At current prices the combined company will have a market cap of roughly $617MM, or 7.6x EBITDA. Divide the $617 by $57MM and get a $10.74 combined new company share price. This makes sense considering existing GMR shareholders will get 73% of the new company (73% times todays stock price of $14.55 is roughly $10.60 and is made up by the 1.34 shares we will get ($10.60*1.34=today's share price).

The BIG NEWSis that the $2.00 divy will continue. Do the math: $2.00/$10.74 combined company share price equates to an awesome 18.6% dividend yield. Since GMR's time charters cover the dividend alone, there is very little risk that they will lower their Dividend (unlike Bank of America who just lowered there's 50% tonight!) About 80% of the combined company will be under time charter contracts until at least 2010 with the other 20% at the more volatile spot rate which has actually been taking a hit lately.

I dont think people have picked up on the new Dividend yield...either that, they don't care, or they don't expect it to continue. I added some more GMR to my 401k today and will probably liquidate something else to add into GMR tomorrow. I plan on holding this one and rolling the Divi into more shares for as long as possible, hopefully until im 100 years old!!!