Eagle Bulk Shipping Inc., an operator of dry-bulk cargo ships, filed for bankruptcy protection after missing a June interest payment, reflecting the drop in shipping rates seen by transport companies since the financial crisis of 2008.
Eagle Bulk entered into a restructuring agreement with lenders holding more than 85 percent of the loans outstanding under its fourth amended credit agreement, which will cut debt by about $975 million, the company said today in a statement.
“With an expedited restructuring process now under way, we are pleased to have the ongoing support of our lenders,” Sophocles Zoullas, Eagle Bulk’s chief executive officer, said in the statement.
The New York-based company listed assets of as much as $950 million and debt of $1.2 billion in its Chapter 11 filing in U.S. Bankruptcy Court in Manhattan.
Under the terms of the proposed restructuring plan, also filed today, lenders will exchange debt for 99.5 percent of the new equity, subject to dilution, and will get cash distribution from the proceeds of an exit loan, according to the statement.
The company plans to borrow as much as $50 million from certain of its pre-bankruptcy lenders to help fund operations as it restructures. The company, which transports iron ore, coal, grain, cement and other products worldwide, said its business won’t be interrupted and obligations to customers and workers will be met.
Eagle Bulk had assets of $1.7 billion as of Dec. 31. Its debt consisted of $1.1 billion in term loans and $60 million of paid-in-kind loans under a credit agreement, it said.
Before the bankruptcy petition, lenders agreed to waive default until Aug. 5, according to a July filing with the U.S. Securities and Exchange Commission.
The company reported a net loss for the year ended Dec. 31 of about $70.5 million compared to a loss of $102.8 million a year earlier, according to the filing. Net revenue increased to about $202.4 million for 2013 compared with $190.8 million for the previous year.
Since the 2008 financial crisis, ocean-transport companies including Overseas Shipholding Group Inc., Korea Line Corp., Britannia Bulk Plc, Armada (Singapore) Pte and Transfield ER Cape have sought bankruptcy protection.
Peter Georgiopoulos’s Genco Shipping & Trading Ltd. filed for bankrutpcy in April, citing weak charter rates. Genco listed assets of $2.4 billion and debt of $1.5 billion. Georgiopoulos’s General Maritime Corp. went through a restructuring in 2012 that gave Oaktree Capital Management LP most of the company’s new stock.
Since Aug. 5, 2008, Panamax rates fell about 92 percent. Supramaxes are down 84 percent and handysize rates dropped 86 percent, according data compiled by Bloomberg. Eagle’s fleet of dry cargo vessels consists mostly of supramax vessels, according to its Website.
Panamax vessels can pass through the Panama Canal and carry a maximum load of 80,000 tons deadweight. Supramax ships can carry from 50,000 to 61,000 deadweight ton (dwt). Handysize vessels have a capacity of as much as 35,000 dwt, according to bulkcarrierguide.com
“Dry bulker rates may improve this quarter from current levels on strong grain harvests as well as robust Chinese demand for commodities such as iron ore,” Lee Klaskow and Talon Custer, Bloomberg Intelligence analysts, said on July 17.
Eagle Bulk rose as high as $1.54 today, a 21 percent gain, before closing at $1.39 in New York trading.
The case is In re Eagle Bulk Shipping Inc., 14-bk-12303, U.S. Bankruptcy Court, Southern District of New York (Manhattan).