March 25: Eagle Bulk Reworks Charter Pacts With Troubled KLC

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Eagle Bulk Shipping ( EGLE) said on March 25 that it had reworked a series of charter agreements with one of its main customers, Korea Line Corp., a troubled shipper that was forced to enter receivership earlier this year as rates for dry-bulk services collapsed amid an oversupply of new vessels entering the market.

Under the new pacts, KLC will charter ten of Eagle's ships at $17,000 a day for each of those vessels. That's down from about $18,400 a day under the original charter agreements. The average going rate on the spot market for those types of ships, known as Supramaxes, stood at about $16,700 a day as of Mach 25, according to the Baltic Exchange, a London ship broker that tracks ocean-going freight rates around the world. The market remains depressed; a year ago, Supramax vessels were fetching a little more than $34,000 on the spot market.

Eagle said that two "newbuildings," or ships currently under construction at shipyards and expected for delivery later this year, will be also be chartered to KLC for $17,000 a day. One other ship didn't see a change in its charter agreement with KLC. Under that agreement, Eagle receives $18,300 a day.

When KLC's bankruptcy first came to light in late January, investors feared that Eagle would be exposed to significant counter-party losses. Eagle's stock was trading at more than $5 before the news emerged. It has yet to recover, finishing the March 25 session at $3.93, up 2%.

In mid-February, KLC announced that it would enter "rehabilitation protection" under a South Korean court.

Dry bulk rates on the spot market at the time of the pact had recovered some since cratering earlier in the year. According to the Baltic Exchange, the average daily fee for a Capesize ship, the largest dry-bulk freighters in the world, rose to $10,700 on March 25. In February, rates for the same vessels were averaging about $5,000 a day.

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