Eagle Bulk sails into Chapter 11

October 2014 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

Following a missed interest payment in June, Eagle Bulk Shipping Inc filed for pre-packaged Chapter 11 bankruptcy protection in August, becoming the latest in a succession of shipping firms to file for bankruptcy in the US. In its filing at Manhattan’s US Bankruptcy Court, Eagle listed assets of between approximately $850m and $950m, and liabilities of $1.2bn.

According to a statement released by the firm, Eagle has agreed a deal with the majority of its lenders to cut its existing debt pile by $975m. Eagle will continue to operate throughout its stay in bankruptcy protection and the firm has announced that its business operations will not be interrupted during this period. The firm’s obligations to its customers and workers will be met. The company’s court documentation notes that Eagle will be able to draw on new financing of up to $50m, although it expects to draw on the first $25m only. The $50m of financing will be provided by some of the company’s existing lenders, although Eagle has not named the specific lenders involved. Wilmington Trust (London) Ltd will serve as agent to the loan.

The firm also noted on its website that current chairman and chief executive Sophocles Zoullas will retain his position in the newly reorganised company. “With an expedited restructuring process now underway, we are pleased to have the ongoing support of our lenders, with whom we will work in partnership to recapitalise Eagle Bulk’s balance sheet and significantly reduce the company’s debt load,” Mr Zoullas noted. “We continue to benefit from a world-class, highly-efficient and versatile fleet, and a deep and experienced management team. Upon emergence from the process, we will continue to build on these competitive advantages and further grow our leadership position in the dry bulk market. We are grateful for the strong support from our lenders, and look forward to the emergence of an Eagle Bulk that is well-positioned for many years of success.”

Eagle, based in New York, is the largest owner of Handymax dry bulk vessels in the US. The company has a fleet of 45 vessels, most of which have been built since 2009. The firm employs around 65 office staff, all of whom are employed at the firm’s subsidiaries and are therefore not factored into the bankruptcy process.

As per the company’s proposed bankruptcy plan filed on 6 August, Eagle’s lenders will convert their debt into 99.5 percent of the equity in the newly reorganised firms and will receive a further cash distribution. At the time of writing, 85 percent of Eagles’ lender group supports the plan. That group includes Bank of America, Canyon Capital Advisors and Oaktree Capital Management, according to the company’s filings. Under the reorganisation scheme, Eagle’s current equity structure would be cancelled and the remaining 0.5 percent of new stock transferred to previous equity holders, along with seven year warrants to acquire a further 7.5 percent of new equity.

Eagle, much like fellow shipping firms Genco Shipping & Trading, Overseas Shipholding Group, Excel Maritime Carriers and Nautilus Holdings Ltd, has endured a difficult period since the onset of the financial crisis. In recent years, an overabundance of new ships on the market has contributed to increasingly depressed shipping rates. Those declining rates have played a significant role in causing a number of shipping firms to file for bankruptcy protection of late. Eagle reported a net loss of $70.5m for the year ended 31 December 2013. The previous year saw the company record losses of $102.8m. Net revenue, however, increased to about $202.4m in 2013, up from $190.8m the previous year. In light of its financial difficulties, Eagle moved to consult with restructuring consultants in December and attempted to complete an out of court restructuring; however, the firm was unable to source any new investors in time.

Richard Summerfield