A New York hedge fund has unveiled a bond position that could give it a nearly 5.4% stake in Eagle Bulk Shipping if the debt securities are converted ahead of a looming takeover by larger Star Bulk Carriers.
Walleye Capital, a multi-strategy investment firm with Minnesota roots, told US securities regulators that its position in Connecticut-based Eagle Bulk’s convertible notes would give it more than 563,000 shares upon conversion. However, Eagle Bulk, or later Star Bulk, could choose to convert the bonds into cash rather than shares.
The holding would be worth almost $31.2m at the latest price for the bulker owner’s shares on the New York Stock Exchange.
But Walleye calculated its 5.4% stake based on Eagle Bulk’s 9.93m outstanding shares reported in November.
The total number of Eagle Bulk shares is certain to increase as more bondholders receive shares, meaning Walleye’s ultimate percentage of the shipowner’s equity may be lower.
With a team of 56 software developers, Walleye has its technology platform as a key pillar of its multi-prong investment strategy, which includes quantitative approaches and sector-focused long and short equity bets.
“Our approach is to allocate risk capital where we believe there to not only be compelling opportunity, but an ability for us to define why we have a tangible edge,” the company says on its website.
The firm did not immediately respond to TradeWinds’ request for comment on the transaction.
Securities & Exchange Commission filings show Walleye started buying up Eagle Bulk’s notes, which have a 5% coupon payout rate, in 2021.
Eagle Bulk is gearing up for a shareholder vote on 5 April on whether it will be merged into Star Bulk to create a market giant with 169 ships and a market capitalisation of around $2.1bn.
If approved, the terms of the $500m all-share deal include potentially issuing Star Bulk shares to convertible note investors.
Some bondholders have already proved unwilling to wait.
Oaktree Capital Management struck early, converting bonds to an equity stake amounting to a 9.96% holding, based on Eagle’s 9.93m outstanding shares.
