Asset sales? Not allowed without bank approval. All proceeds go to the bank. And since asset sales don't even cover the debt owed on the assets, that gets you know where.
New bank loans? What banks are lining up to loan them new money? Nobody!
New paper? Who's buying that? They've had a shelf registration for a while. Nobody stupid enough to buy into that.
Perhaps you might pay attention to the fact that they've actually hired a RESTRUCTURING SPECIALIST. You know what that means? It means you're going to get taken to the cleaners when they RESTRUCTURE the company to get the lenders off your back. No matter how you slice that issue, it means you get EXTREMELY DILUTED!
All eyes on Eagle Bulk
Equity analysts and investors appear to be growing increasingly concerned about the future of embattled US bulker operator Eagle Bulk Shipping.
On Monday, Wall Street was rife with rumours that the Nasdaq-listed owner has accelerated the pace of a campaign to shore up its balance sheet after assembling a team of attorneys who specialise in financial restructurings.
When contacted by TradeWinds about conflicting reports that Skadden, Arps, Slate, Meagher & Flom and Milbank, Tweed, Hadley & McCloy were hired to serve as legal advisors a spokesman for Eagle Bulk declined to comment.
Since the former was recruited by Excel Maritime Corp in the weeks leading up to the Greek bulker owner’s US bankruptcy petition and the latter is involved in the overhaul of Overseas Shipholding Group, it may not come as a surprise that investors are eager for answers.
In the absence of an update about management’s most recent efforts to cure their company’s financial maladies or public response to questions about legal counsel, observers say there’s a strong chance that lingering doubts about Eagle Bulk’s ability to avoid Chapter 11 will continue.
Last month the company warned investors that the maintenance of covenant compliance in the coming year would depend heavily on freight rates in the first quarter of 2014 and the overall health of its core market, which is currently seeing daily levels of around $16,200.
While management said loan breaches were unlikely to occur before 31 March, Michael Webber of Wells Fargo Securities believes a cash shortfall could materialise even sooner if demand for supramaxes started to deteriorate in the fourth quarter of this year.
In a recent client briefing the Wall Street equity analyst also pointed out that the Royal Bank of Scotland’s decision to sell a $780m chunk of Eagle Bulk bank debt to strategic investors like Oaktree and Centerbridge Capital “elevates the risk of a Chapter 11 filing”.
Where have you been the last 3 years? They have renegotiated multiple times. At some point the bill comes due and you have to pay back what you borrowed. You should assume the Excel reorganization is the Oaktree model. Converting debt to equity is the only thing that allows Eagle to survive. The more debt they convert, the more diluted current equity holders end up finding themselves.
My prediction, current equity holders walk away with 5% of the company, 10% max, and realistic chance they might also get nothing.