EGLE’s inexplicable rally

Investors were scratching their heads Friday on the heels of a rally that saw shares of Eagle Bulk Shipping take flight.

The US bulker owner emerged as the ‘Top Performer’ on the TradeWinds Shipping Index as its Nasdaq-quoted shares rose 6.01% to $3.34.

It’s unclear why the stock gained traction but many investors admit they were expecting it to slide on the heels of a regulatory filing that reignited uncertainty about the operator’s future.

While the jury is still out some industry observers believe Eagle Bulk was the target of unusually high options trading, an opinion shared by reporters at a web publication called InterCooler.

Citing a report issued by it said traders purchased 3,179 put options on the stock, which represents an increase of nearly 700% when compared to a typical day’s volume.

The spike followed a disclosure in which Eagle Bulk said it landed another extension of a waiver that gives management more time to restructure $1.2bn worth of debt.

Under the terms of the latest amendment, which marks its fifth stay of execution, the operator and its lenders much reach an agreement by 27 June.

Industry observers note the new extension is scheduled to elapse three days before the expiration of the original waiver, which was implemented back in March.

They are also quick to point out that, unlike previous extensions, Eagle Bulk wasn’t allowed reset the debt clock without offering its lenders an incentive.

According to the filing the company must pay a forbearance fee of approximately $6m or amend the terms of warrants issued in June of 2012.

If the latter option is chosen, under the terms of the extension, the warrants would be immediately exercisable at any price, a possibility that led many to believe shares of Eagle Bulk would drop in response to renewed concerns about dilution.

In the filing the company acknowledged that the lenders are holders of its warrants and also pointed out that management is scheduled to deliver an update about efforts to refinance its $1.2bn credit facility on 12 June.

While some believe this implies that Eagle Bulk may be able to cure its financial maladies others continue to think it will end up pursuing a restructuring by way of a Chapter 11 bankruptcy filing in the Southern District of New York.  

Eagle Bulk is based in Manhattan where it oversees a fleet of over 40 supramax bulkers. Today, tonnage trading spot was commanding day rates of around $8,500 on average while units seeking period work saw levels of around $13,000.