Excel Maritime Carriers – A Sad Day of Reckoning Coming Soon

By Lambros Papaeconomou, NYFEX Asset Management LLC

Dry cargo shipping company Excel Maritime Carriers Ltd. (EXM) saw its share price drop almost 45% yesterday.  The stock closed at $0.43 (down $0.35 for the day) on very heavy trading, amid persistent rumors of am imminent bankruptcy filing, and even a formal inquiry by the New York Stock Exchange that necessitated a “no comment” response from the company.

As sad as it is to watch the once almighty shipping company falling from grace, its demise should not come as a surprise.  Saddled with a total debt burden in excess of $1 billion, Excel has straggled to meet the covenant terms of its main syndicated credit facility with Nordea Bank, and bilateral facilities with DVB & ABN, despite amended agreements with its lenders just last March.

In addition, Excel has yet to file audited financial statements for fiscal year 2012.  The current “D-Day” for the company to meet its end of the bargain with its lenders is April 30, 2013.  Given the sad state of freight markets, and increased pressure on commercial banks to cut their credit exposure to the industry amid regulatory concerns, the company’s filing for bankruptcy protection is an issue of when rather than if.

Speculative-minded investors would fare better if they sat on the sidelines at this juncture, as the risk of bankruptcy far outweighs any short-term bounce in the stock price.