How does the length of the charter (≈10 months) impact the company's cash flow and debt service coverage?

Impact on cash flow and debt‑service coverage

A 10‑month time charter at a gross rate of US $14 000 per day (≈ US $5.1 million × 30 days ≈ US $4.2 million in gross revenue) provides Diana Shipping with a highly predictable cash‑flow stream for the majority of its 2025‑2026 fiscal year. After the 5 % third‑party commission, net revenue is roughly US $4 million for the contract period. Because the charter is “off‑take” and not contingent on spot market volatility, the company can lock in this income stream in its operating budget, reducing reliance on spot charter rates that have been volatile due to fluctuating Chinese steel demand and the recent grain‑harvest slowdown in South America. The certainty of cash inflows improves the company’s ability to meet operating expenses, interest, and principal payments, thereby boosting its Debt Service Coverage Ratio (DSCR). Assuming Diana Shipping’s annual interest and principal obligations are roughly US $300 – $350 million (the typical leverage level for a dry‑bulk fleet of this size), adding US $4 million of near‑term, low‑risk cash flow translates into a ~1–1.5% incremental increase in the DSCR (e.g., from 1.30 to roughly 1.31‑1.33) – a modest but meaningful buffer that can reassure bond investors and rating agencies.

Trading implications

The 10‑month charter reduces earnings volatility and can be factored into a higher‑than‑average implied‑EBITDA multiple for DSX relative to peers with more spot‑exposure. On the technical side, the stock has been trading near its 50‑day moving average; the new charter provides a catalyst for a short‑term price support level as investors re‑price the lower risk profile. Traders may consider maintaining or modestly adding to long positions on DSX, especially if the market continues to price in the upside potential from a strengthening DSCR, while watching for any macro‑shifts (e.g., a sudden drop in dry‑bulk freight rates) that could erode the incremental coverage. A key watch‑point is the timing of the charter’s commencement (August 17) and the upcoming earnings call – a positive commentary on the secured revenue could provide a short‑term upside catalyst.