UPDATE: Citigroup Reiterates Sell Rating, Lowers PT on Eagle Bulk Shipping as Restructuring Risk Intensifies with Another Difficult Quarter

In a report published Friday, Citigroup analyst Christian Wetherbee reiterated a Sell rating on

, but lowered the price target from $2.50 to $0.50. In the report, Citigroup noted, “Eagle reported 3Q13 EPS of ($2.22), worse than our ($1.40) target and consensus at a -$1.72. More important than the earnings, we believe that investors should continue to focus on Eagle's ability to meet its covenant limits and cash flow generation. We now forecast Eagle to violate covenants in 4Q as we estimate its leverage ratio will deteriorate to 12.8x, above its 12.3x limit. We note that its leverage ratio has deteriorated from write-offs of its KLC investment ($7mm charge in 3Q, $22mm balance remaining), and it will likely take another charge in 4Q considering the decline in KLC equity of ~48% QTD. While in the past technical breaches of covenants have only resulted in expensive waivers and bank amendments, with a large amount of the company's bank debt owned outside of the original lending syndicate, we believe the chance of liquidity event or meaningful equity dilution are more likely than ever. As such, we maintain our Sell rating and lower our price target to 50c, representing only stub equity value.” Eagle Bulk Shipping closed on Thursday at $3.31.