Rainy June in New York prior to Marine Money Week

Excel Maritime, the New York listed drybulk owner (with 38 vessels) with a small office in suburban Westchester, announced that it was in discussions, working with its debtors towards a pre-packaged bankruptcy filing. Debtors will be voting on a proposed restructuring, which, if agreed, will for the basis of an actual Chapter 11 bankruptcy filing. In "pre-packs", where a proposed financial re-organization is agreed in advance before the actual filing is made, the business continues to operate, with trade creditors continuing to be paid. Some guidance on the timeline can be found in the case of General Maritime (also a "pre-pack). The debtor company emerged from the bankruptcy in March, 2012- five months after its Chapter 11 filing, with a new owning structure, after an approval by a bankruptcy court.

For Excel, where the mountain of debt exceeds the value of the company; the centerpiece of the proposed re-organization is the restructuring of $771 million of syndicated bank debt. Bankers talk about extending runways; the new debt will be paid down through 2018, two years later than the major chunks of the pre-filing debt. Ownership will be in the hands of a new company, owned 40% by the lending syndicate and 60% by the Panayotides family (which owns approximately 55% of the equity prior to a filing)- which will be infusing $30 million of cash into the deal. The family has the ability to increase its stake to 75% by putting in $20 million more, over the next 18 months. Under the plan, two 2005-built Supramaxes will be sold to partially satisfy obligations under one smaller lending facility. Unsecured creditors (including investors in a $150 issue of convertible bonds due 2027), and common equity holders, get little or nothing back.

Excel's announcement did not surprise anybody around New York. Possible filings by other listed drybulk outfits headquartered in midtown Manhattan continue to provide fodder for conversations at the many gatherings of New York bankers and lawyers. However, one bankruptcy filing does not necessarily portend a whole wave; Jefferies & Co. analyst Doug Mavrinac told listeners on a Capital Link web broadcast that "...we don't expect filings among the companies that we cover." In his overview of the drybulk market, Mr. Mavrinac, based in Houston but a frequent visitor to New York, acknowledged that conditions are currently "challenging", but pointed to a situation where demand growth could begin to outstrip the fleet's growth by late 2013 and into 2014. If the stars align properly, fleet growth could be reduced to 2% annually, in the face of demand growing at a 6 % - 7% annual rate. With only nine ships on period charters (and six of these coming off in late 2013 / early 2014), the re-organized Excel (and its peer companies) could have an opportunity to bask in the sunshine of rising period rates, if the market does begin to pick up later this year.

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