Shares of Eagle Bulk Shipping have fallen as much as 29 percent, after the company warned that it could breach certain loan terms if freight rates remained low.
Eagle Bulk also reported a wider-than-expected quarterly loss as it struggles with the tough conditions in one of the worst-ever downturns in the shipping industry.
Though rates for larger vessels have improved in recent months, rates for the supramax and handymax vessels that Eagle Bulk owns have remained subdued.
Eagle Bulk said that unless rates improved significantly over the next five months or so, it would breach some covenants under its credit facility on or after Mar. 31.
It also warned that it could breach covenants in the current quarter if rates fell further, or it failed to cut costs or it suffered more losses on its investment in Korea Lines Corp .
Eagle Bulk recorded a non-cash loss of $7.3 million on the investment in the third quarter ended Sept. 30.
The company will likely have to go back to the negotiation table with lenders, sources said, after Reuters reported that Royal Bank of Scotland was in talks to sell the $800 million it holds in Eagle Bulk debt.
“Right now we are looking to our agent, which is RBS, to officially advise us and at that point we will take certain steps,” Eagle Bulk CEO Sophocles Zoullas said on a call when analysts asked about the sale of the loan.
Eagle Bulk said that it would be able to fund its operations for the rest of the year and that it was evaluating asset sales, equity and debt financing To raise funds.
The company’s adjusted loss of $2.06 in the third quarter was bigger than analysts’ expectations of $1.72, according to Thomson Reuters I/B/E/S. (Reuters)