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Eagle Bulk Shipping Inc. Message Board

  • tencjedd tencjedd Feb 15, 2013 9:16 AM Flag

    What you might want to be aware of regarding Eagle's restructured debt...from a prominent freight industry brokerage house

    In the immediate term, the restructuring gives Eagle Bulk some breathing room, but the delayed imposition of the above mentioned covenants might force them into another restructuring during 2013. Here’s why:
    Minimum Interest Coverage Ratio
    Effective June 30, 2013 and requires that Eagle Bulk generate a trailing four quarter EBITDA at least 1.3 times its trailing four-quarter cash interest expense. For the third quarter of 2012, Eagle Bulk is estimated to have a cash interest expense of US $13.2 million. To meet the minimum interest coverage, Eagle Bulk must generate EBITDA in excess of US $17 million. In the second quarter 2012, EBITDA was just under US $10 million.
    Leverage Ratio
    Begins September 30, 2013 and states Eagle Bulk’s debt outstanding must not exceed 13.9 times its trailing four-quarter EBITDA. The current debt outstanding of US $1.1 billion would indicate a required minimum average quarterly EBITDA in excess of US $20.3 million starting with the fourth quarter of 2012.
    Minimum Liquidity
    States Eagle Bulk must maintain minimum liquidity of US $22.5 million (US $0.5 million per vessel). As of June 30th , 2012, Eagle Bulk had liquidity reserves of US $37.1 million, US $20 million credit facility plus US $17.1 million cash. Taking out US $5.8 million for unpaid financing costs, leaves the company with just under a US $8 million unrestricted cash cushion.

    Eagle Bulk’s restructuring was executed quicker than some of the others which have occurred in the industry and it did so while staying out of court proceedings. Initially, it appeared the lenders were willing to provide flexible terms for a mutually beneficial restructuring. However, we see the details of the deal, including delayed covenants, are just as important to consider as the major terms of the deal related to principal payments, interest and maturity. Eagle Bulk bought itself some time to evaluate further options but it is by no means sitting comfortably to ride out the remaining depressed freight rate environment in the dry bulk market.

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