We Have Seen the Future and LTV is Part of It

While unfair to single Eagle Bulk Shipping in particular, they happened to be in the news last week as a result of a disagreement with their bank with respect to the calculation of covenants. In his report titled “Covenant Dispute arises as Asset Values Double-Dip”, Citi’s Christian Wetherbee noted that Eagle disclosed “Friday that the agent for its $1.2 billion credit facility with The Royal Bank of Scotland has deemed that the company had been in compliance with the original collateral maintenance covenant (130% fleet value/loan value) for two consecutive quarters (2Q10 and 3Q10), thus reinstating the original vessel value covenant of the facility. This becomes an issue as the agent also noted that as of March 31, 2011, Eagle was no longer in compliance with the covenant due to the recent downturn. Eagle is disputing the claim and was only notified of the compliance and subsequent breach recently.”

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