Citi Reports Eagle Bulk Shipping Agreement With KLC Mitigates Losses
According to Citi, Eagle Bulk Shipping (NASDAQ: EGLE) reached an agreement with Korea Lines (KLC) to amend the charters of 12 of its 13 vessels chartered out to KLC (one vessel is sub-charted out to a third party and will retain its charter).
Citi reported that, from March 15, 2011 through December 31, 2015, the new base rate for the 12 vessels (10 on-water and 2 newbuilds with 2H11 delivery) is $17,000/day, down from an avg. of ~$18,400/day, with Eagle retaining additional profits between $17,000 and $21,000/day. “Above $21,000/day profits will be split 50/50. On a full-year basis, we estimate that the reduction in charter hire will result in $6 million of lost revenue, equating to a $0.10 hit to EPS. The renegotiated rate is above the current market for Supramaxes of ~$16,500/day, but is an 8% discount to its previous rate. In our view, the agreement is neither the best outcome, nor the worst, but importantly maintains the long-term employment profile of this portion of its fleet (8 years on avg. for KLC chartered vessels).”
Eagle Bulk Shipping closed yesterday at $3.93.
