Eagle downshifts

Eagle Bulk Shipping has effectively cancelled eight of its newbuildings and put its dividend on hold as it shores up its operating position.

The New York bulker owner said Friday that it struck a deal with Yanghzou Dayang Shipbuilding to turn $363m in orders for the supramax octet into options and apply the entire $47m deposit to progress payments for other units at the yard.

The move may not come as a surprise, as speculation suggested the company was negotiating cancellation of 11 or 12 newbuildings at Yanghzou Dayang. (Read a story on the speculation here.)

Debt covenant issues

Analysts have pointed to Eagle Bulk as among US-listed bulker owners in danger of breaching debt covenants amid the slide in ship values. The observers have suggested banks might push owners for dividend cuts and other moves to shore up finances.

The Nasdaq-listed supramax player says its moves announced Friday enhance internal growth and increase financial flexibility.

"We see this as positive," Maxim Group analyst Charles Rupinski said of Friday's announcement. "This is a value-added move that may be somewhat tempered by the dividend suspension near-term but strengthens company longer term."

Eagle Bulk CEO Sophocles Zoullas says the deals will help deliver shareholders long-term value.

The company paid $55,000 in cash for each option to potentially buy the ships at the original order price of between $36.7m and $42.3m.

Also in the deal, Eagle Bulk has rescheduled delivery of the 53,100-dwt Thrush from September 2009 to November 2010.

Chief executive Sophocles Zoullas says the newbuilding changes reduce capital expenditures by 33%, while increasing charter coverage to 63% in 2009 and 43% in 2010.

In suspending its $0.50-per-share dividend, Eagle Bulk says it aims to increase cash flow and optimise financial flexibility. The company's stock dropped by 17.8% to $7.34 in mid-morning trading.

Loans amended

The owner also has amended its agreement with lenders to amend its $1.6bn revolving credit facility to $1.35bn, a deal that brings the company lower asset value requirements in its loan covenants.

"We firmly believe that these agreements, one with our shipyard, and one with our lenders, represent the proactive strategic direction that will deliver long-term value to our shareholders through enhanced internally generated growth," Zoullas said.

The agreements are expected to lead to non-cash writedowns in the Eagle Bulk's financial earnings reports.

The newbuilding deals leave Eagle Bulk, which owns 22 handymax and supramax bulkers on the water, with orders for 24 more.

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