‘The Freeseas fade’

Greek bulker operator FreeSeas has returned to the capital markets for cash to wipe out debt.

In a statement published prior to the close the Nasdaq-listed owner said it is looking to sell up to $25m worth of Series D Convertible Preferred Stock and Series C Warrants.

The company identified Dawson James Securities as the placement agent and pointed out that the fundraiser is expected to close on 28 May 2014.

FreeSeas, which currently oversees a fleet of five handysizes and one handymax, said the securities will be solid in units of 250,000 at a price of $100.00 a piece.

Each will consist of one convertible and warrants to purchase 200% of the shares of common stock underlying the preferred stock at an excise price that will amount to 130% of the conversion price on the initial date of issue.

“The initial conversion price of each share of Series D Preferred Stock will be the lesser of $1.09, the closing bid price of our common stock on 16 May, and the greater of the closing bid price of our common stock on the date immediately prior to the closing,” it added.

If all goes according to plan FreeSeas indicated $22m will be used to eliminate debt linked to Credit Suisse, which amounts to an initial haircut of approximately $15m since the Athens-based operator owes the bank roughly $37m.

“Upon Credit Suisse's receipt of such $22m Credit Suisse will also cancel all the remaining debt owed by FreeSeas and its subsidiaries, which is approximately $15m,” the owner continued before pointing out the remainder will be used for “general corporate purposes”.

Industry observers note this is not the first time one of the company's lenders have been forced to take a haircut. Critics, in jest, have started calling this approach to debt repayment the FreeSeas “fade”, which is a reference to a doo they describe as “high and tight”.