Eagle Bulk Shipping Inc. (EGLE)

Q2 2012 Earnings Call

August 9, 2012, 08:30 am ET


Sophocles Zoullas - Chairman & CEO

Adir Katzav - CFO


Chris Wetherbee - Citi

Natasha Boyden - Global Hunter

Michael Webber - Wells Fargo

Urs Dur - Lazard Capital Markets

Chris Wetherbee - Citi



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Good day ladies and gentlemen and welcome to the Eagle Bulk Shipping Incorporated reports second quarter 2012 results conference call. My name is Ann and I will be your coordinator for today's call. As a reminder, this conference is being recorded for replay purposes. At this time, all participants are in listen-only mode. (Operator instructions) We will be facilitating a question-and-answer session following the presentation.

I would now like to turn the presentation over to your host for today’s call, Mr. Sophocles Zoullas, Chairman and CEO. Please proceed, sir.

Sophocles Zoullas

Thank you and good morning. I would like to welcome everyone to Eagle Bulk Shipping's second quarter 2012 earnings call. To supplement our remarks today, I encourage participants to access slide presentation that is available on our website at www.eagleships.com.

Please note that part of our discussion today will include forward-looking statements. These statements are not guarantees of future performance and are inherently subject to risk and uncertainties. You should not place undue reliance on these forward-looking statements. We refer all of you to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties that may have a direct bearing on our operating results, our performance and our financial condition.

Please note on slide three the agenda for today’s call will be as follows: I will review our second quarter 2012 results and highlights. We’ll then proceed with an update of our commercial operations and finally present our current views on the market. Our CFO Adir will then give an overview of our financials before we open the call to questions.

Please turn to slide five for a review of our financial results and highlights. The dry bulk market remained in a depressed state during the second quarter with peak order book deliveries continuing unabated; weaker than expected demand in the period added further to the existing negative sentiment, as did the recently enacted export ban on minerals from Indonesia.

Newbuilding deliveries during the second quarter totaled a record 32 million deadweight tons or almost 390 vessels. This represents an increase of approximately 7% over the first quarter and almost 34% year-over-year.

On the demand side, lower global appetite for steel and in turn iron ore put a damper on the major bulks and overall short-term trade outlook. In May, Indonesia imposed a ban on mineral exports which effectively halted nickel ore and bauxite cargos.

Turning to Eagle Bulk, the company reported a net loss of $23.1 million or $1.46 per share for the second quarter of 2012. Earnings for the period were primarily impacted by the depressed spot market. Net revenue for the quarter was $48.5 million and EBITDA for the quarter amounted to $10 million and fleet utilization remained at an impressive level of close to 99.5%. Overall, the second quarter of 2012 remained extremely challenging for the dry bulk market as peak supply growth continued to heavily outweigh demand.

Finally, as we previously announced on June 20th, we reached a comprehensive agreement with our lenders which effectively amended the terms of our debt and has provided us with a greatly improved ability to navigate through the trough of the shipping cycle without compromising our ability to benefit when the market does emerge from the cyclical downturn.

Please turn to slide six for a summary of our amended loan terms. The $1.1 billion of debt outstanding under our previous facility has been amended into a term loan. In addition, we have secured a liquidity facility in the amount of $20 million. This amount is currently undrawn and available.

Maturity has been extended to December 2015 and subject to certain conditions, the company maintains the option to extend maturity by a further 18 months to June 2017. The amended loan contains a quarterly cash sweep on amounts above $20 million with no fixed amortization until maturity.

Cash interest margin over LIBOR is 350 basis points and the loan will also bear a non-cash PIK interest component of 250 basis points. The credit agreement allows for margin to be reduced with lower leverage.

In addition, the company issued warrants to lending group equal to 19.9% of shares outstanding. One-third of the warrants are exercisable immediately, one-third when the stock price reaches $10 and the last third exercisable when the stock reaches $12. All expenses relating to the transaction will be amortized over the life of loan.

To summarize, we are very pleased to have reached a favorable outcome with our lenders. We believe our amended loan gives us the required flexibility; low cash interest margin and no fixed amortization to help us better manage the current challenging freight market and position the company and its shareholders to benefit from the shipping cycle recovery. I would like to thank our lending group for their cooperation in reaching this new agreement and for their ongoing support of the company.

I would also like to take this opportunity to personally thank Alan Ginsberg, our outgoing CFO for his efforts on getting this and many other deals done and seeing it through until completion. I also thank Alan for his dedication and devotion to the company over the last 7.5 years and wish him the best of luck in his new endeavors.

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