Scorpio Bulkers and its lenders have agreed to amend the some of the covenants included in all its credit facilities, in what is likely to be a response to the declining asset values of bulk carriers.
The NYSE-listed shipping company has agreed “in principle” to prepay a total of around $14.5m in principal installments on its outstanding borrowings, of which $12.1m will be repaid on principal installments due between the second quarter of 2016 and the third quarter of 2018.
The interest coverage ratio of each respective each agreement will not be applicable until the first quarter of 2018, subsequent to the amendments. At this point the ratio will be 1.00 to 1.00 and will be calculated on a year-to-date basis for the first and second quarter of 2018, before reverting back to the original covenant level of 2.50 to 1.00, Scorpio said.
The value-to-loan ratio covenant of each respective credit facility has been reduced to 140%, apart from Scorpio’s $67.5m credit facility, where the covenant level has been reduced to 115%.
Scorpio said it has also agreed in principle with all of its lenders to amend definitions within its covenants for leverage ratio and consolidated net worth to exclude “certain non-operating items”.
The loan adjustments are likely to be pre-emptive measures to insulate the company from the declining values of assets against which the loans have been secured. Other owners of bulk carriers have recently breached their loan covenants with lenders for this same reason.
According to estimates from VesselsValue.com, the market value of Scorpio Bulkers’ live fleet has declined by around 34% compared to six months ago. The online platform today says the fleet is worth $534.23m, excluding newbuildings, whereas the figure was $715.62m on November 8, 2015.