Connecticut-based Eagle Bulk Shipping is not fretting over its liquidity position despite splashing out $219m to buy out backer Oaktree Capital Management and now confronting a dry bulk market that is taking longer than expected to lift off tepid rates.

Eagle chief executive Gary Vogel was asked about liquidity by Jefferies analyst Omar Nokta on the company’s quarterly earnings call on Friday morning after reporting a narrow profit, but also guiding to current freight rates that are around the outfit’s financial breakeven.

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Is Vogel comfortable?

“The short answer is ‘yes,’’ the CEO told Nokta. “Our liquidity is almost $200m at the end of the quarter and our leverage is in the low 30% range.

“Most importantly, we’re constructive on the market. China has been slow out of the gate after the Covid lockdowns. And we also wanted to speak in detail about the level of congestion. Ships are getting out of drydock much more quickly now whereas during Covid that was very difficult, so it’s increased the effective level of supply. So we’re back to normal but very positive on the market. We feel quite good.”

The Stamford-based outfit has reported that it ended the quarter with $118m in cash and $60m undrawn under a revolving credit facility. Eagle financed the purchase of 3.8m Oaktree shares at $58 each with cash on hand and a $125m draw on the revolver.

Eagle’s buy of the Oaktree stake in June came just before it was publicly disclosed that two other New York-listed owners, Danaos of Greece and Castor Maritime of Cyprus, had bought a combined one-third of Eagle, which then introduced anti-takeover language into its bylaws.

“While punitive to current shareholders given other holders were not offered the chance to participate, the deal ultimately was value creative at the time given the discount to NAV. However, vessel values have continued to ease and our NAV currently stands at $61.50/sh,” Nokta wrote in a client note on Friday.

Eagle continues to trade at a substantial discount to that NAV figure, having closed at $45.11 per share on Thursday. Nokta has maintained a “buy” rating on the stock with a price target of $55.

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Besides highlighting the unwinding of congestion and China malaise as factors in stunting dry bulk’s recovery, Vogel said the continued lack of scrapping has been a wet blanket on rates.

“Throughout my career, the [maximum age] has pretty consistently been at 26 years and now it’s 30 years,” Vogel said.

“But that’s largely because people are reading the same tea leaves. The orderbook is low and the market is going to tighten. We haven’t had any real scrapping since 2015 and 2016. Having said that, a ship over 15 years old has to drydock every 30 months. In the midsize sector we saw more ships scrapped last quarter than in all of last year, but it’s not enough.”

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