Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
Eagle Bulk Shipco LLC—Norwegian Bonds
As previously disclosed in the Company’s Current Report on Form 8-K, filed on December 4, 2017, the net proceeds from the Bonds were issued into escrow, to be released and disbursed to Eagle Shipco upon the satisfaction of certain conditions precedent. On December 8, 2017, such conditions were met, and the net proceeds after issuance discount and arranger fees of approximately USD 195,000,000 were released. These net proceeds from the Bonds,
together with the proceeds from the new Credit Agreement and cash on hand, were used to repay all amounts outstanding under the First Lien Facility, which was approximately USD 193,003,000, and the Second Lien Facility, which was approximately USD 77,429,200, and to pay expenses associated with the refinancing transactions.
Eagle Shipping LLC
—
Credit Agreement
On December 8, 2017, Eagle Shipping entered into the Credit Agreement, which provides for (i) a term loan facility in an aggregate principal amount of up to USD 60,000,000 (the “
Term Loan
”) and (ii) a revolving credit facility in an aggregate principal amount of up to USD 5,000,000 (the “
Revolving Loan
”). Outstanding borrowings under the Credit Agreement bear interest at LIBOR plus 3.50% per annum.
The Credit Agreement matures on the earlier of (i) five years from the initial borrowing date under the Credit Agreement and (ii) December 8, 2022. With respect to the Term Loan, Eagle Shipping is required to make quarterly repayments of principal in an amount set forth on an amortization schedule, with a final balloon payment to be made at maturity. With respect to the Revolving Loan, Eagle Shipping must repay the aggregate principal amount of all borrowings outstanding on the maturity date. Accrued interest on amounts outstanding under the Term Loan and the Revolving Loan must be paid on the last day of each applicable interest period. Interest periods are for three months, six months or any other period agreed between Eagle Shipping and the Lenders. Finally, Eagle Shipping must prepay certain specified amounts outstanding under the Credit Agreement if an Eagle Shipping Vessel (as defined below) is sold or becomes a total loss or if there is a change of control with respect to the Company, Eagle Shipping or any Guarantor.
Eagle Shipping’s obligations under the Credit Agreement are secured by, among other items, a first priority mortgage on the nine vessels in Eagle Shipping’s fleet as identified in the Credit Agreement and such other vessels that it may from time to time include with the approval of the Lenders (the “
Eagle Shipping Vessels
”), an assignment of certain accounts, an assignment of certain charters with terms that may exceed 12 months, an assignment of insurances, an assignment of certain master agreements, and a pledge of the membership interests of each of Eagle Shipping’s vessel-owning subsidiaries. In the future, Eagle Shipping may grant additional security to the Lenders from time to time.
The Credit Agreement contains financial covenants requiring Eagle Shipping to maintain minimum liquidity of USD 500,000 in respect of each Eagle Shipping Vessel and to maintain a consolidated interest coverage ratio of not less than a range varying from 1.50 to 1.00 to 2.50 to 1.00. In addition, the Credit Agreement also imposes operating restrictions on Eagle Shipping and the Guarantors, including limiting Eagle Shipping’s and the Guarantors’ ability to, among other things: pay dividends; incur additional indebtedness; create liens on assets; sell assets; dissolve or liquidate; merge or consolidate with another person; make investments; engage in transactions with affiliates; and allow certain changes of control to occur.
The Credit Agreement also includes customary events of default, including those relating to: a failure to pay principal or interest; a breach of covenant, representation or warranty; a cross-default to other indebtedness; the occurrence of certain bankruptcy and insolvency events; the occurrence of certain ERISA events; a judgment default; the cessation of business; the impossibility or unlawfulness of performance of the loan documents; the ineffectiveness of any material provision of any loan document; the occurrence of a material adverse effect; and the occurrence of certain swap terminations.
This summary of the Credit Agreement does not purport to be complete, and is qualified in its entirety by reference to the text of the Credit Agreement, a copy of which is filed as Exhibit 10.1 hereto and is incorporated into this Item 2.03 by reference.
Eagle Bulk Shipco LLC
—
Super Senior Facility
On December 8, 2017, Eagle Shipco entered into the Super Senior Facility, which provides for a revolving credit facility in an aggregate amount of up to USD 15,000,000. The proceeds of the Super Senior Facility, which are currently undrawn,
are expected, pursuant to the terms of the Super Senior Facility, to be used (i) to acquire
additional vessels or vessel owners and (ii) for general corporate and working capital purposes of Eagle Shipco and its subsidiaries. The Super Senior Facility matures on the earlier of (i) December 8, 2022 and (ii) three months prior to final maturity for the Bonds, which will mature on November 28, 2022.
Outstanding borrowings under the Super Senior Facility will bear interest at LIBOR plus 2.00% per annum. For each loan that is requested under the Super Senior Facility, Eagle Shipco must repay such loan along with accrued interest on the last day of each interest period relating to the loan. Interest periods are for three months, six months or any other period agreed between Eagle Shipco and the Super Senior Facility Agent. Additionally, subject to the other terms of the Super Senior Facility, amounts repaid on the last day of each interest period may be re-borrowed.
Eagle Shipco’s obligations under the Super Senior Facility are guaranteed by the limited liability companies that are subsidiaries of Shipco and the legal and beneficial owners of 28 vessels in the Company’s fleet (the “
Eagle Shipco
Vessel Owners
”), and will be secured by mortgages over such vessels, a pledge granted by the Company over all of the shares of Eagle Shipco, a pledge granted by Eagle Shipco over all the shares in the Eagle Shipco Vessel Owners, certain charter contract assignments, certain assignments of earnings, a pledge over certain accounts, an assignment of insurances covering security vessels, and assignments of intra-group debt between the Company and Eagle Shipco or its subsidiaries. The Super Senior Facility ranks super senior to the Bonds with respect to any proceeds from any enforcement action relating to security or guarantees for both the Super Senior Facility and the Bonds.
The Super Senior Facility contains certain covenants that, subject to certain exceptions and qualifications, among other things, limit Eagle Shipco’s and its subsidiaries’ ability to do the following: make distributions; carry out any merger, other business combination, or corporate reorganization; make substantial changes to the general nature of their respective businesses; incur certain indebtedness; incur liens; make loans or guarantees; make certain investments; transact other than on arm’s-length terms; enter into sale and leaseback transactions; engage in certain chartering-in of vessels; or dispose of shares of Eagle Shipco Vessel Owners. Additionally, Eagle Shipco’s leverage ratio must not exceed 75% and its and its subsidiaries’ free liquidity must at all times be at least USD 12,500,000. Also, the total commitments under the Super Senior Facility will be cancelled if (i) at any time the aggregate market value of the security vessels for the Super Senior Facility is less than 300% of the total commitments under the Super Senior Facility or (ii) if Eagle Shipco or any of its subsidiaries redeems or otherwise repays the Bonds so that less than USD 100,000,000 is outstanding under the Bond Terms.
The Super Senior Facility also contains certain events of default customary for transactions of this type, including, but not limited to, those relating to: a failure to pay principal or interest; a breach of covenants, representation or warranty; a cross default to other indebtedness; the occurrence of certain bankruptcy and insolvency events; the cessation of business; the impossibility or unlawfulness of performance of the finance documents for the Super Senior Facility; and the occurrence of a material adverse effect.
This summary of the Super Senior Facility does not purport to be complete, and is qualified in its entirety by reference to the text of the Super Senior Facility, a copy of which is filed as Exhibit 10.2 hereto and is incorporated into this Item 2.03 by reference.
The refinancing transactions will require the Company to write-off deferred financing costs on the First Lien Facility and the Second Lien Facility in an amount of approximately USD 15,000,000 in the fourth quarter of 2017.