Thursday, April 2, 2009

Bookkeeping: Selling Half Excel Maritime (EXM)

We caught a quite lucky break on this one; Excel Maritime (EXM) jumped nearly 20% today on a renegotiation of a covenant agreement... the terms are very good on the debt and essentially takes away much of the risk from this name since the debt due dates are pushed out so far. However, they are issuing a ton of shares (25M) relative to their outstanding base 44M which is major dilution but that's the cost for staying alive - many companies saddled with debt will be doing this.
  • Excel Maritime Carriers Ltd (EXM) said it secured covenant waivers from lenders for two outstanding credit facilities and obtained a $45 million capital infusion from its major shareholder
  • The Greek dry bulk carrier said lenders have deferred debt repayments totalling $150.5 million due in 2009 and 2010 to 2016. The capital infusion comes from entities affiliated to the Panayotides family.
  • Excel Maritime said it has been granted waivers for its Nordea Bank syndicated facility and the Credit Suisse bilateral facility, which are valid till the beginning of 2011.
  • The company will issue 25.7 million Class A shares and 5.5 warrants, with an exercise price of $3.50 per warrant.
That said, the Baltic Dry Index is imploding... I just want readers to remember this because when the Baltic Dry Index was surging [Feb 9: China and the Baltic Dry Index - What's Really Going On?] bulls pointed to it as a reason to cheer global trade was rebounding and/or it was a mustard seed showing a coming rebound. We showed it was nothing more than a short term surge by China stocking up on iron ore. Now when it's falling? Dismiss it. It means nothing - the rebound in 6 months happens without ships (or trade). Remember the BDI was at 3000-5000 during "normal times" before spiking in latter 2007 to mid 2008. It "surged to 2300" which made bulls joyous and now is already back down to below 1600.

As we always say, the news does not matter - it is the reaction to the news. I just want to show you the double talk spin that is infamous in the market. When a data point is moving in your direction use it to make your case - when it works against you, then gloss it over and talk about something else ;) That said when the mob all runs in one direction, trying to talk logic is a useless endevaor. Now that we've slayed the accountants, our problems are nearly completely solved as the 700,000 newly unemployed Americans will tell you tomorrow. For the 5th month in a row we'll be told that is a backwards looking indicator.

Very difficult market this week as 2/3rds of every days move happens when the market is closed or in the first 10 minutes of the day. Gap down (Monday), gap up (Tuesday), gap down (Wednesday), gap up (today). But as we said, we think there is a good chance of S&P 870 - thought there would be more resting before it happened but in just a month we jumped from the fear to hope. In government we truly trust.

I cut half my Excel Maritime (2.4% allocation) near $5.60. Due to the share issuance I might be selling out of this stock and trying to find another dry bulk stock as my proxy. But since the bulls are roaring I want to hold it until they tire out then re-assess.

Long Excel Maritime in fund; no personal position

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