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Old 11-06-2008, 08:40 AM   #281
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Interesting, but mostly already out there. Where do you find this stuff ha?
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Old 11-06-2008, 08:46 AM   #282
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Interesting, but mostly already out there. Where do you find this stuff ha?
This was just happenstance. I was looking for an explanation of a special dividend by Imperial Tobacco earlier this year and just came across this piece on the current shipping situation when I followed the link to the Imperial article.

For me, information sticks better when it is in narrative form. I don't think I have ever known of a similarly huge drop in prices in any commodity market as the spot charter rates referenced in this article. No wonder the bulker stock prices are down.

Ha
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Old 11-06-2008, 02:42 PM   #283
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might not reach $1.89 and looks like this is probably the bottom for NM
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Old 11-07-2008, 09:09 AM   #284
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A bit of covenant analysis I wrote up on NM. One of the fears running through the market about the bulkers seems to be that they will bust a standard covenant in shipping bank agreements that requires the value of the fleet to be north of 125% of the outstanding bank loan amount.

We all know that this is what the market is a-quiver about right now, so why not take a close look at the facts and circumstances?
First let me state a few assumptions:

- NM will not have trouble avoiding problems with fixed charge covenants, cash flow, net worth covenants, etc. This is pretty much about collateral value vs. bank debt.
- Charterers will not fall down on NM's deals with them. If they do, NM is insured, so I think this holds water even if you are less sanguine about this assumption.
- The dry bulk market will not stay at a sub 1000 BDI forever. At these levels, we will see massive scrapping and order cancellations and there is no way we will see any further tanker conversions.

Now that that is out of the way, lets look at the debt NM actually has and will have. At 6/30, they had $705MM of debt and will draw down roughly another $235MM on already establshed bank lines to complete the construction of 4 capes that are financed and chartered. So we are looking at $940MM of total debt. For the purpose of this analysis, we will assume that the remaining cape newbuilds on order get cancelled as NM presumably will not be able to finance the orders.

About $100MM of the debt belongs to NSALI and is carried by taht unit, with no market value implications to the bulker fleet. Another $300MM is the senior unsecured debt that does not require collateral of a particular market value. So the remaining debt ($940 - $400 = $540) of $540MM is what requires sufficient collateral to avoid covenant problems.

All the bank lines have essentially the same language: the market value of the ships must be at least 125% of the outstanding debt on the ships. So the point at which the covenant is breached is when the value of the fleet drops below 540 * 1.25 = $675MM.
So what is the fleet? I see an owned fleet of 12 supras (including the recently purchased Ulysses and the TBN supra due early '09), 5 panas (including the Asteriks), and 4 capes (all under construction with charters and financing already in place). Your guess as to value is as good as the next. By way of a (very) rough guess, let's put a value of $40MM on each supra and pana, and $50MM on each cape. That values the fleet as follows:

Supras: 12 X 40 = $480MM
Panas: 5 X 40 = $200MM
Capes: 4 X 50 = $200MM
Total: $880MM

That looks pretty comfortably ahead of our minimum covenant requirement.

If the above fleet valuation proves generous, what might the alternatives available to NM be?

- First and foremost, NM can cure a potential default by paying down some of the debt. The company had $284MM in unencumbered cash available at 6/30, some of which was used to purchase the Ulysses. I estimate that over the next 18 months NM will generate EBITDA between $50 and $60MM a quarter inclusive of NMM dividends (assuming charters renew at 10k for supras, 15k for panas and 20k for capes), vs. interest expense of $10 to $15MM per quarter. If they don't chop dividends it would requirethe continued outlay of another $9MM or so per quarter, leaving the company with roughly $30MM per quarter with which to de-lever.
- NM could sell assets and use the proceeds to pay down some of the bank debt. I think their share of NSALI is potentially worth $150 to $200MM. They could conceivably sell ships as well.
- Finally, NM could get a covenant waiver from the banks. The banks who financed NM are the same ones who financed lots of dry bulker owners who are in far worse shape than NM, so I suspect that NM will not be at the top of the list as to who they go after first. After all, if you have guys like DWT to deal with, you will not be too quick to pester a borrower who is making principal and interest payments, has locked in charter revenue for years to come, etc.
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Old 11-07-2008, 11:20 AM   #285
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Thanks for the info Brewer.
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Old 11-07-2008, 12:03 PM   #286
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Brewer, this analysis makes complete sense. But I am getting gun-shy from repeatedly buying something and immediately losing $10,000.

We know this lady is pretty. But are we sure she doesn't have herpes?

Ha
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Old 11-07-2008, 12:45 PM   #287
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We know this lady is pretty. But are we sure she doesn't have herpes?

Ha
In this particular case, it appears we will find out in a week or so when earnings come out.
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Old 11-07-2008, 05:20 PM   #288
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NM down another 5.5% today. Boy, what a pounding I have taken.
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Old 11-07-2008, 05:27 PM   #289
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Ok - you guys do NM while I hold back trying to jump in and buy some more EGLE.

heh heh heh - I almost feel like a hot day trader with all this potential action. .
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Old 11-07-2008, 07:19 PM   #290
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EGLE might be seeing $3 in a few weeks
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Old 11-07-2008, 09:40 PM   #291
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EGLE might be seeing $3 in a few weeks
Do you have a basis for saying that? Give it up if you're not just being pessimistically sarcastic!

Anybody know why the relative strength difference between NM and EGLE today? EGLE up with market, but very strong at +19%. And NM falling further, down 5%+
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Old 11-07-2008, 09:49 PM   #292
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Anybody know why the relative strength difference between NM and EGLE today? EGLE up with market, but very strong at +19%. And NM falling further, down 5%+
Because I own NM. Enough said.
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Old 11-08-2008, 09:33 PM   #293
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EGLE is closer to $10

reason i think EGLE is going to $3 or $3.50 is by looking at the chart
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Old 11-10-2008, 01:15 PM   #294
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one of my trading blogs mentioned NAT today

dividend date is the 18th or 22nd. you can buy and hold until then, sell and collect the dividend. yield is almost 20%
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Old 11-11-2008, 10:25 AM   #295
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NM is still sinking. So is EGLE. Of coarse I own both. NM is now below $2.00. Crap!!
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Old 11-11-2008, 10:43 AM   #296
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NM is still sinking. So is EGLE. Of coarse I own both. NM is now below $2.00. Crap!!
Yep. I thought I bought when lots of bad news was in the NM price.

Nevertheless, I'm down 50%.

Investors must be afraid that they have been lied to, or that unknown possibilities will jump out and kill the company. This is a BK price, in a company that has no obvious BK tells.

I was afraid of this competitive commodity industry when it was flying, but later after reversals I thought "Can't get killed falling out of a basement window." Wrong!

Ha
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Old 11-11-2008, 11:22 AM   #297
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Nevertheless, I'm down 50%.



Ha
Consider yourself lucky.
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Old 11-13-2008, 03:18 PM   #298
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Well the market was up 6.5% today and NM was up a whopping 2 pennies. Let the good times roll.
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Old 11-13-2008, 03:49 PM   #299
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Hey Dawg, I'm holding 4000 at about 15. Make you feel any better that you're not alone?
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Old 11-13-2008, 04:18 PM   #300
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Hey Dawg, I'm holding 4000 at about 15. Make you feel any better that you're not alone?
Wow, you got me beat. I have 3,200 shares at 10. I'll take a med for you.
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