It has been a busy week in the dry sale and purchase market and we have a number of sales to report. Following the sale of the (non‐grab‐fitted) "KT VENTURE" (abt 55,868 dwt Sanoyas 2007, C4x30T) last week for a price of $18.3m to Greek buyers, clients of K‐Line, Singapore invited offers for a pair of 2006 grab‐fitted Kawasaki supramax sister units "VANDA COLOSSUS" and "ARANDA COLOSSUS" (abt 55,810 Kawasaki 2006 C4x30T), these have now been committed to undisclosed Singaporean buyers enbloc for a price in the region of $33m basis a charter free delivery February and March 2013.
A seven year old Supra is worth $16.5 milion....16 of EGLE's are that age or older. 21 are about 3 years old on average. They are worth maybe $20 million each. Call it $19 million per. Fleet value of about $700 million give or take a nickel. They are on the books for $1.7 billion. Are they really off by a BILLION? The debt was what again? $1.1 billion? Seems that they are a smidgen underwater....
I was recently asked to perform an analysis of the fair market value for vessels in the EGLE fleet and compare my findings to the amount EGLE reports to investors on the consolidated balance sheet. The filings I used for reference were the 2011 Annual and Q3-2012 as the most to date filings available. The first thing I point out is that EGLE does not use a vessels fair market value on the consolidated balance sheet, instead, and rather conveniently they use their own number they call “carrying value” described as vessel costs net of accumulated depreciation. The lenders do not accept this misleading number as you can see from the lower paragraph below. The lenders require vessel values to be measured by fair market value for their calculations.
The two paragraphs below are taken from the EGLE 2011 Annual Report. The first paragraph is the closest you get to an honest answer from them about fair market value of their vessels. The second paragraph simply confirms the banks position of using fair market value over a self calculated carrying value.
*Indicates drybulk carriers for which we believe, as of December 31, 2011, the basic charter-free market value is lower than the vessel’s carrying value. We believe that the aggregate carrying value of these vessels exceeds their aggregate basic charter-free market value by approximately $667 million.
“For the purposes of the revolving credit facility, our "total assets" includes our tangible fixed assets and our current assets, as set forth in our consolidated financial statements, except that the value of any vessels in our fleet that secure our obligations under the facility are measured by their fair market value rather than their carrying value on our consolidated balance sheet.”
If we apply a discount of 667 Million dollars that EGLE admits is overstated in vessel values to the consolidated balance sheet we get the following results.
Q3-2012 vessel value reported = $1,733,192,789
Total assets reported = $1,813,966,597
Less Overstatement (-667M) = $1,146,966,597
Recalculated Total Assets = $1,146,966,597
Less Total Liabilities reported = $1,813,966,597
Net Worth becomes negative = (-$667,000,000)
I might get to publish my actual current fleet value for EGLE tomorrow. Needless to say but … my valuation will certainly be a great deal lower than the example above using their numbers, and that is already very very bad.