(Dry-bulk shipping story updated with further details on Deutsche Bank's downgrade of Genco Shipping, and for closing stock prices.)

NEW YORK ( TheStreet) -- Dry-bulk shipping stocks plunged across the board Tuesday after a major South Korean freight company -- which hires out vessels from ship owners, including several publicly traded ones -- filed for receivership amid one of the worst markets for dry-bulk cargoes since the financial crisis.

By far the most exposed to the struggles of Korea Line Corp. was Eagle Bulk Shipping ( EGLE), whose stock fell 11.3% to $4.01 in frantic trading Tuesday. Volume surpassed 12 million shares, nearly ten times the daily average turnover in the name.

According to one hedge-fund trader who focuses on shipping stocks, Korea Line has chartered 13 of Eagle Bulk's 48 ships. The charters are long term, lasting between six and ten years. That gives Eagle Bulk about $700 million in exposure to Korea Line, according to the calculations of the trader.

Eagle Bulk officials weren't immediately available for comment, but the company released a statement Monday to address the issue. It called its exposure to Korea Line "modest," saying that "the vast majority of our charters with KLC are fixed at close to current market rates."

Eagle said it "expects to be engaged in ongoing and constructive dialogue with KLC as the Company works on its rehabilitation plans. We will continue to update the market as events warrant."

Some investors fear that the bankruptcy of one of Eagle's most important customers could trigger breaches in its loan covenants. The company has about $1.1 billion in debt, which is about the same as the value of the company's fleet, according to the shipping-equities trader.

>>Dry Bulk 2011: Working Through the Glut

In a bit of cruel irony, Eagle at one point held insurance for just this situation -- i.e., to cover losses associated with the default of a charterer -- but the company decided to let that insurance expire last year, the trader said.

In a press release, Korea Line said it plans to maintain operations as it works to restructure its debt, Bloomberg reported Tuesday. It remains unclear what will become of Eagle's charter arrangements with Korea Line.

Word of a possible Korea Line bankruptcy had been rumored in the shipping industry for several weeks. Short interest in Eagle Bulk stock had risen of late as well.

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