New York-listed Eagle Bulk Shipping is expected to secure bank debt against the seven vessels acquired in the past two quarters and likely fully restore its revolving credit facility.
That is the take from Jefferies lead equity analyst Randy Giveans, who recently hosted a series of client calls with the Connecticut-based owner.
Eagle has been one of dry bulk’s most acquisitive owners in recent months.
The purchases included three 2011-built supramaxes from Alterna Capital and four Scorpio Bulkers ultramaxes.
Eagle used shares as partial payment for the Alterna buys and for one of the Scorpio purchases, plus a total of $86.3m in cash. The shares were valued around $12.4m at the time of the purchases, pushing the outlay to some $98.7m.
“Management values unencumbered vessels and prefers to keep its revolvers with plenty of liquidity to provide flexibility,” Giveans said in a client note.
“As such, we expect the company to reduce the drawn amount on its revolvers via the addition of more permanent financing at an attractive rate for its recent acquisition of seven vessels.”
Eagle is likely to attract 55% to 60% financing on the recently purchased ships, Giveans said in a message to TradeWinds.
This would equate to some $55m in freed liquidity.
Eagle has two revolving credit facilities with a total capacity of $70m, of which $55m is currently available, according to company filings.
The surging rates environment for dry bulk also has helped strengthen Eagle’s balance sheet.
Jefferies projects Eagle to generate $90m in cash flow from operations in the current year, and expects some of that to go towards repaying debt.
This could bring projected debt-to-Ebitda ratio down to a multiple of three in 2021 from 8.4 in 2020.
Gary Vogel-led Eagle ended 2020 with about $89m in cash already on the balance sheet.
Giveans is projecting near-term increases in Eagle’s net asset value on the back of rising vessel values.
"Buy"-rated Eagle recently has traded above Jefferies’ $38 price target on the share, but an increase in net asset value almost certainly means a higher price target is in store.
As TradeWinds has reported, Eagle has put a $50m at the market (ATM) equity issuance programme in place that could fuel further acquisitions.
“Management believes having an ATM programme authorised during 2021 in an improving market environment is appropriate and will allow them to engage in ships-for-shares deals should it be accretive to shareholders,” Giveans told clients.
