SEC Filing | Eagle Bulk Shipping Inc.

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egle-20220930

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________________ to __________________

Commission File Number 001-33831

EAGLE BULK SHIPPING INC.

(Exact name of Registrant as specified in its charter)


Republic of the Marshall Islands						98-0453513
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

300 First Stamford Place, 5th floor

Stamford, Connecticut 06902

(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (203) 276-8100

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	EGLE	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-Accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

Number of shares of registrant’s common stock outstanding as of November 2, 2022: 13,680,968

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)

	Condensed Consolidated Balance Sheets as of Sept ember 30, 2022 and December 31, 2021	F-1

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021	F-2

	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021	F-3

	Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2022 and 2021	F-4

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	F-6

	Notes to Condensed Consolidated Financial Statements	F-7

ITEM 2.	MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	12

ITEM 4.	CONTROLS AND PROCEDURES	12

PART II	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	13
ITEM 1A.	RISK FACTORS	13
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	13
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	13
ITEM 4.	MINE SAFETY DISCLOSURES	13
ITEM 5.	OTHER INFORMATION	13
ITEM 6.	EXHIBITS	14
SIGNATURES		15

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbor provided for under these sections. These statements may include words such as “believe,” “estimate,” “project,” “intend,” “expect,” “plan,” “anticipate,” and similar expressions in connection with any discussion of the timing or nature of future operating or financial performance or other events. Forward-looking statements reflect management’s current expectations and observations with respect to future events and financial performance.

Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by those forward-looking statements. The principal factors that affect our financial position, results of operations and cash flows include, charter market rates, which could decline from historic highs, periods of charter hire, vessel operating expenses and voyage costs, which are incurred primarily in U.S. dollars, depreciation expenses, which are a function of the cost of our vessels, significant vessel improvement costs and our vessels' estimated useful lives, and financing costs related to our indebtedness. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors which could include the following: (i) changes in demand in the drybulk market, including, without limitation, changes in production of, or demand for, commodities and bulk cargoes, generally or in particular regions; (ii) greater than anticipated levels of drybulk vessel newbuilding orders or lower than anticipated rates of drybulk vessel scrapping; (iii) changes in rules and regulations applicable to the drybulk industry, including, without limitation, legislation adopted by international bodies or organizations such as the International Maritime Organization and the European Union (the “EU”) or by individual countries; (iv) actions taken by regulatory authorities, including, without limitation, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”); (v) changes in trading patterns significantly impacting overall drybulk tonnage requirements; (vi) changes in the typical seasonal variations in drybulk charter rates; (vii) changes in the cost of other modes of bulk commodity transportation; (viii) changes in general domestic and international political conditions, including the current conflict between Russia and Ukraine, which may impact our ability to retain and source crew, and in turn, could adversely affect our revenue, expenses, and profitability; (ix) changes in the condition of the Company's vessels or applicable maintenance or regulatory standards (which may affect, among other things, our anticipated drydocking costs); (x) significant deterioration in charter hire rates from current levels or the inability of the Company to achieve its cost-cutting measures; (xi) the duration and impact of the novel coronavirus (“COVID-19”) pandemic, including the availability and effectiveness of vaccines on a widespread basis and the impact of any mutations of the virus; (xii) the relative cost and availability of low and high sulfur fuel oil; (xiii) our ability to realize the economic benefits or recover the cost of the scrubbers we have installed; (xiv) any legal proceedings which we may be involved from time to time; and other factors listed from time to time in our filings with the Securities and Exchange Commission (the “SEC”). This discussion also includes statistical data regarding world drybulk fleet and order book and fleet age. We generated some of this data internally, and some were obtained from independent industry publications and reports that we believe to be reliable sources. We have not independently verified this data nor sought the consent of any organizations to refer to their reports in this Quarterly Report on Form 10-Q. We disclaim any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

PART I: FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

September 30, 2022 and December 31, 2021

(U.S. Dollars in thousands, except share data and par values)


	September 30, 2022		December 31, 2021
	(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents	$	195,030	$	86,147
Accounts receivable, net of a reserve of $2,192 and $1,818, respectively	33,554		28,456
Prepaid expenses	4,585		3,362
Inventories	26,274		17,651
Collateral on derivatives	1,200		15,081
Fair value of derivative assets - current	18,353		4,669
Other current assets	703		667
Total current assets	279,699		156,033
Noncurrent assets:
Vessels and vessel improvements, at cost, net of accumulated depreciation of $249,384 and $218,670, respectively	876,547		908,076
Advance for vessel purchase	4,125		—
Operating lease right-of-use assets	34,368		17,017
Other fixed assets, net of accumulated depreciation of $1,566 and $1,403, respectively	346		257
Restricted cash - noncurrent	2,575		75
Deferred drydock costs, net	45,881		37,093
Fair value of derivative assets - noncurrent	9,873		3,112
Advances for ballast water systems and other assets	2,577		4,995
Total noncurrent assets	976,292		970,625
Total assets	$	1,255,991	$	1,126,658
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable	$	21,058	$	20,781
Accrued interest	1,635		2,957
Other accrued liabilities	17,012		17,994
Fair value of derivative liabilities - current	611		4,253
Current portion of operating lease liabilities	30,742		15,728
Unearned charter hire revenue	14,794		12,088
Current portion of long-term debt	49,800		49,800
Total current liabilities	135,652		123,601
Noncurrent liabilities:
Global Ultraco Debt Facility, net of debt issuance costs	193,202		229,290
Convertible Bond Debt, net of debt discount and debt issuance costs	103,425		100,954
Noncurrent portion of operating lease liabilities	3,626		1,282
Other noncurrent accrued liabilities	883		265
Total noncurrent liabilities	301,136		331,791
Total liabilities	436,788		455,392
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 25,000,000 shares authorized, none issued as of September 30, 2022 and December 31, 2021	—		—
Common stock, $0.01 par value, 700,000,000 shares authorized, 13,003,516 and 12,917,027 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	130		129
Additional paid-in capital	964,494		982,746
Accumulated deficit	(162,712)		(313,495)
Accumulated other comprehensive income	17,291		1,886
Total stockholders' equity	819,203		671,266
Total liabilities and stockholders' equity	$	1,255,991	$	1,126,658

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-1

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

(U.S. Dollars in thousands, except share and per share data)


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Revenues, net	$	185,313	$	183,393	$	568,406	$	409,816

Voyage expenses	40,792		30,273		120,710		81,411
Vessel operating expenses	33,091		28,125		88,213		73,323
Charter hire expenses	19,772		10,724		63,768		25,374
Depreciation and amortization	15,407		13,570		45,241		39,187
General and administrative expenses	9,666		7,948		29,611		23,559
Other operating expense	2,469		792		2,643		2,312
Gain on sale of vessel	(9,336)		(3,962)		(9,336)		(3,962)
Total operating expenses	111,861		87,470		340,850		241,204
Operating income	73,452		95,923		227,556		168,612
Interest expense	4,236		8,511		13,021		25,561
Interest income	(881)		(19)		(1,100)		(52)
Realized and unrealized (gain)/loss on derivative instruments, net	(11,293)		8,991		(13,281)		45,588
Loss on debt extinguishment	4,173		99		4,173		99
Total other (income)/expense, net	(3,765)		17,582		2,813		71,196
Net income	$	77,217	$	78,341	$	224,743	$	97,416

Weighted average shares outstanding:
Basic	12,993,450		12,802,401		12,985,329		12,237,288
Diluted	16,201,852		15,936,374		16,219,264		15,354,481

Per share amounts:
Basic net income	$	5.94	$	6.12	$	17.31	$	7.96
Diluted net income	$	4.77	$	4.92	$	13.86	$	6.34

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-2

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

(U.S. Dollars in thousands)


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Net income	$	77,217	$	78,341	$	224,743	$	97,416
Other comprehensive income:
Net unrealized gain on cash flow hedges	4,554		80		15,405		724
Comprehensive income	$	81,771	$	78,421	$	240,148	$	98,140

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-3

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

For the Three and Nine Months Ended September 30, 2022 and 2021

(U.S. Dollars in thousands, except share data)


	Common stock	Common stock amount		Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive income		Total stockholders’ equity
Balance at December 31, 2021	12,917,027	$	129	$	982,746	$	(313,495)	$	1,886	$	671,266
Net income	—	—		—		53,073		—		53,073
Dividends declared ($2.05 per share)	—	—		—		(27,112)		—		(27,112)
Cumulative effect of adoption of ASU 2020-06	—	—		(20,726)		8,676		—		(12,050)
Issuance of shares due to vesting of restricted shares	60,890	1		(1)		—		—		—
Issuance of shares upon exercise of stock options	8,077	—		85		—		—		85
Unrealized gain on cash flow hedges	—	—		—		—		8,681		8,681
Fees for equity offerings	—	—		201		—		—		201
Cash used to settle net share equity awards	—	—		(1,862)		—		—		(1,862)
Stock-based compensation	—	—		1,487		—		—		1,487
Balance at March 31, 2022	12,985,994	130		961,930		(278,858)		10,567		693,769
Net income	—	—		—		94,453		—		94,453
Dividends declared ($2.00 per share)	—	—		—		(26,449)		—		(26,449)
Issuance of shares due to vesting of restricted shares	3,187	—		—		—		—		—
Unrealized gain on cash flow hedges	—	—		—		—		2,170		2,170
Cash used to settle net share equity awards	—	—		(53)		—		—		(53)
Stock-based compensation	—	—		1,605		—		—		1,605
Balance at June 30, 2022	12,989,181	130		963,482		(210,854)		12,737		765,495
Net income	—	—		—		77,217		—		77,217
Dividends declared ($2.20 per share)	—	—		—		(29,075)		—		(29,075)
Issuance of shares due to vesting of restricted shares	14,335	—		—		—		—		—
Unrealized gain on cash flow hedges	—	—		—		—		4,554		4,554
Cash used to settle net share equity awards	—	—		(437)		—		—		(437)
Stock-based compensation	—	—		1,449		—		—		1,449
Balance at September 30, 2022	13,003,516	$	130	$	964,494	$	(162,712)	$	17,291	$	819,203

F-4


	Common stock	Common stock amount		Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Total stockholders’ equity
Balance at December 31, 2020	11,661,797	$	116	$	943,572	$	(472,138)	$	(1,132)	$	470,418
Net income	—	—		—		9,849		—		9,849
Issuance of shares due to vesting of restricted shares	71,146	1		(1)		—		—		—
Unrealized gain on cash flow hedges	—	—		—		—		600		600
Fees for equity offerings	—	—		(32)		—		—		(32)
Cash used to settle net share equity awards	—	—		(811)		—		—		(811)
Stock-based compensation	—	—		872		—		—		872
Balance at March 31, 2021	11,732,943	117		943,600		(462,289)		(532)		480,896
Net income	—	—		—		9,225		—		9,225
Issuance of shares due to vesting of restricted shares	2,773	—		—		—		—		—
Issuance of shares upon conversion of warrants	432,037	4		8,371		—		—		8,375
Issuance of shares from ATM Offering, net of commissions and issuance costs	581,385	6		27,278		—		—		27,284
Issuance of shares upon exercise of stock options	4,117	—		22		—		—		22
Unrealized gain on cash flow hedges	—	—		—		—		44		44
Cash used to settle net share equity awards	—	—		(174)		—		—		(174)
Stock-based compensation	—	—		586		—		—		586
Balance at June 30, 2021	12,753,255	$	127	$	979,683	$	(453,064)	$	(488)	$	526,258
Net income	—	—		—		78,341		—		78,341
Issuance of shares upon conversion of Convertible Bond Debt	25	—		1		—		—		1
Issuance of shares upon conversion of warrants	109,861	1		2,304		—		—		2,305
Issuance of shares upon exercise of stock options	857	—		33		—		—		33
Unrealized gain on cash flow hedges	—	—		—		—		80		80
Issuance costs for ATM Offering	—	—		(146)						(146)
Stock-based compensation	—	—		777		—		—		777
Balance at September 30, 2021	12,863,998	$	128	$	982,652	$	(374,723)	$	(408)	$	607,649

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-5

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended September 30, 2022 and 2021

(U.S. Dollars in thousands)


	Nine Months Ended
	September 30, 2022		September 30, 2021
Cash flows from operating activities:
Net income	$	224,743	$	97,416
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	35,513		32,951
Amortization of operating lease right-of-use assets	21,083		10,536
Amortization of deferred drydocking costs	9,728		6,236
Amortization of debt discount and debt issuance costs	1,627		5,443
Loss on debt extinguishment	4,173		99
Gain on sale of vessel	(9,336)		(3,962)
Net unrealized (gain)/loss on fair value of derivatives	(8,517)		24,193
Stock-based compensation expense	4,542		2,235
Drydocking expenditures	(18,527)		(10,737)
Changes in operating assets and liabilities:
Accounts payable	650		4,639
Accounts receivable	(5,098)		(10,645)
Accrued interest	(1,241)		2,385
Inventories	(8,622)		(5,467)
Operating lease liabilities current and noncurrent	(21,076)		(11,304)
Collateral on derivatives	13,881		(31,370)
Fair value of derivatives, other current and noncurrent assets	(183)		(1,150)
Other accrued liabilities	(2,332)		1,898
Prepaid expenses	(1,223)		(1,455)
Unearned charter hire revenue	2,706		8,974
Net cash provided by operating activities	242,491		120,915

Cash flows from investing activities:
Purchase of vessels and vessel improvements	(781)		(109,385)
Advances for vessel purchases	(4,125)		(2,200)
Purchase of scrubbers and ballast water systems	(5,695)		(4,557)
Proceeds from hull and machinery insurance claims	—		245
Proceeds from sale of vessel	14,944		9,159
Purchase of other fixed assets	(253)		(29)
Net cash provided by/(used in) investing activities	4,090		(106,767)

Cash flows from financing activities:
Proceeds from New Ultraco Debt Facility	—		16,500
Repayment of Norwegian Bond Debt	—		(4,000)
Repayment of term loan under New Ultraco Debt Facility	—		(24,258)
Repayment of revolver loan under New Ultraco Debt Facility	—		(55,000)
Repayment of revolver loan under Super Senior Facility	—		(15,000)
Proceeds from revolver loan under New Ultraco Debt Facility	—		55,000
Proceeds from Holdco Revolving Credit Facility	—		24,000
Proceeds from issuance of shares under ATM Offering, net of commissions	—		27,242
Repayment of term loan under Global Ultraco Debt Facility	(37,350)		—
Repurchase of Convertible Bond Debt	(14,188)		—
Cash received from exercise of stock options	85		56
Cash used to settle net share equity awards	(2,351)		(986)
Equity offerings issuance costs	201		(292)
Financing costs paid to lenders	(18)		(614)

Dividends paid	(81,577)		—
Net cash (used in)/provided by financing activities	(135,198)		22,648
Net increase in cash, cash equivalents and restricted cash	111,383		36,796
Cash, cash equivalents and restricted cash at beginning of period	86,222		88,849
Cash, cash equivalents and restricted cash at end of period	$	197,605	$	125,645
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest	$	12,861	$	17,462
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	38,956	$	22,499
Accruals for vessel purchases and vessel improvements included in Other accrued liabilities	$	—	$	500
Accruals for scrubbers and ballast water treatment systems included in Accounts payable and Other accrued liabilities	$	3,916	$	3,259
Accruals for dividends payable included in Other accrued liabilities and Other noncurrent accrued liabilities	$	1,551	$	—
Accrual for issuance costs for ATM Offering included in Other accrued liabilities	$	—	$	104
Accruals for debt issuance costs included in Accounts payable and Other accrued liabilities	$	—	$	509

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-6

EAGLE BULK SHIPPING INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Basis of Presentation and General Information

The accompanying condensed consolidated financial statements include the accounts of Eagle Bulk Shipping Inc. and its wholly-owned subsidiaries (collectively, the “Company,” “we,” “our” or similar terms). The Company is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership, charter and operation of drybulk vessels. The Company’s fleet is comprised of Supramax and Ultramax drybulk carriers, and the Company operates its business in one business segment.

As of September 30, 2022, the Company owned and operated a modern fleet of 52 oceangoing vessels, including 26 Supramax and 26 Ultramax vessels with a combined carrying capacity of 3.14 million deadweight tons (“dwt”) and an average age of approximately 9.9 years. Additionally, the Company charters-in five Ultramax vessels on a long term basis with remaining lease terms of approximately one year each and also charters-in vessels on a short term basis for a period of less than one year.

For the three and nine months ended September 30, 2022 and 2021, the Company’s charterers did not individually account for more than 10% of the Company’s gross charter revenue during those periods.

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), and the rules and regulations of the SEC that apply to interim financial statements and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes normally included in consolidated financial statements prepared in conformity with U.S. GAAP. They should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2021 Annual Report on Form 10-K, filed with the SEC on March 14, 2022 (the “Form 10-K”).

The accompanying condensed consolidated financial statements are unaudited and include all adjustments (consisting of normal recurring adjustments) that management considers necessary for a fair presentation of its condensed consolidated financial position and results of operations for the interim periods presented.

The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire year.

In March 2021, the Company entered into an at market issuance sales agreement with B. Riley Securities, Inc., BTIG, LLC and Fearnley Securities, Inc., as sales agents (each, a “Sales Agent” and collectively, the “Sales Agents”), to sell shares of common stock, par value $0.01 per share, of the Company with aggregate gross sales proceeds of up to $50.0 million, from time to time through an “at-the-market” offering program (the “ATM Offering”). During the second quarter of 2021, the Company sold and issued an aggregate of 581,385 shares at a weighted average sales price of $47.97 per share under the ATM Offering for aggregate net proceeds of $27.1 million after deducting sales agent commissions and other offering costs. The proceeds were used for partial financing of vessel acquisitions and other corporate purposes.

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The significant estimates and assumptions of the Company are residual value of vessels, the useful lives of vessels, the value of stock-based compensation, estimated losses on our trade receivables, fair value of Convertible Bond Debt (as defined below) and its equity component, fair value of operating lease right-of-use assets and operating lease liabilities and the fair value of derivatives. Actual results could differ from those estimates.

Note 2. Recent Accounting Pronouncements

Significant Accounting Policies

The Company's significant accounting policies are described in Note 2, Significant Accounting Policies, in the Notes to the Consolidated Financial Statements in the Form 10-K. Included herein are certain updates to those policies.

F-7

Recently Adopted Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. ASU 2020-06 removes from U.S. GAAP the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, after adopting the ASU's guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, the entity will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock (i.e., as a single unit of account), unless (1) a convertible instrument contains features that require bifurcation as a derivative under Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. The Company adopted ASU 2020-06 as of January 1, 2022 under the modified retrospective approach. The Convertible Bond Debt (defined below) will no longer require bifurcation and separate accounting of the equity component. The resulting debt discount will no longer be amortized to interest expense over the life of the bond and thus an adjustment to beginning retained earnings of $8.7 million was recorded within Accumulated deficit reflecting the cumulative impact of adoption. Additionally, a $20.7 million reduction to Additional paid-in capital was recorded to reverse the equity component and an offsetting $12.0 million was recorded within Convertible Bond Debt, net of debt discount and debt issuance costs as a reversal of the debt discount.

Recently Issued Accounting Pronouncements Not Yet Effective

The FASB has issued accounting standards that had not yet become effective as of September 30, 2022 and may impact the Company's condensed consolidated financial statements or related disclosures in future periods. Those standards and their potential impact are discussed below:

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2020-04”). ASU 2020-04 addresses concerns about certain accounting consequences that could result from the anticipated transition away from the use of LIBOR and other interbank offered rates to alternative reference rates. ASU 2020-04 is elective and applies “to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.” ASU 2020-04 establishes (1) a general contract modification principle that entities can apply in other areas that may be affected by reference rate reform and (2) certain elective hedge accounting expedients. ASU 2020-04 is optional and effective for all entities as of March 12, 2020 and may be applied prospectively to contract modifications made on or before December 31, 2022. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, (“ASU 2021-01”), which clarifies certain provisions in Topic 848, if elected by an entity, to apply to derivative instruments that use interest rate for margining, discounting, or contract price alignment that is modified as a result of rate reference reform. The Company is currently evaluating the adoption of ASU 2020-04 on its debt under the Global Ultraco Debt Facility (as defined below) as it bears interest on outstanding borrowings at LIBOR plus a margin rate. Additionally, the Company is also evaluating the adoption of ASU 2021-01 on its interest rate swaps related to the Global Ultraco Debt Facility.

Note 3. Vessels

Vessels and Vessel Improvements

As of September 30, 2022, the Company’s owned operating fleet consisted of 52 drybulk vessels.

During the third quarter of 2018, the Company entered into a contract for the installation of ballast water treatment systems (“BWTS”) on 39 of our owned vessels. The projected cost, including installation, is approximately $0.5 million per BWTS. The Company intends to complete the installations during scheduled drydockings. The Company completed installation of BWTS on 32 vessels and recorded $19.8 million in Vessels and vessel improvements in the Condensed Consolidated Balance Sheets as of September 30, 2022. Additionally, the Company recorded $1.9 million as advances paid toward installation of BWTS on the remaining vessels recorded in Advances for ballast water systems and other assets in the Condensed Consolidated Balance Sheets as of September 30, 2022.

On June 8, 2022, the Company signed a memorandum of agreement to sell the vessel Cardinal for a total consideration of $15.8 million. The vessel was delivered to the buyer during the third quarter of 2022. The Company recorded a gain of $9.3 million in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022.

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During the third quarter of 2022, the Company entered into a memorandum of agreement to acquire a high-specification 2015-built scrubber-fitted Ultramax bulkcarrier for a total consideration of $27.5 million. The vessel is expected to be delivered to the Company in November 2022.

Activity in Vessels and vessel improvements for the nine months ended September 30, 2022 is below:


(In thousands)
Vessels and vessel improvements, at December 31, 2021	$	908,076
Purchase of vessels and vessel improvements	703
Sale of vessel	(5,592)
Scrubbers and BWTS	8,709
Depreciation expense	(35,349)
Vessels and vessel improvements, at September 30, 2022	$	876,547

Note 4. Debt


(In thousands)	September 30, 2022		December 31, 2021
Convertible Bond Debt	$	104,119	$	114,119
Debt discount and debt issuance costs - Convertible Bond Debt	(694)		(13,165)
Convertible Bond Debt, net of debt discount and debt issuance costs	103,425		100,954
Global Ultraco Debt Facility	250,200		287,550
Debt discount and Debt issuance costs - Global Ultraco Debt Facility	(7,198)		(8,460)
Less: Current portion - Global Ultraco Debt Facility	(49,800)		(49,800)
Global Ultraco Debt Facility, net of debt issuance costs	193,202		229,290
Total long-term debt	$	296,627	$	330,244

Convertible Bond Debt

On July 29, 2019, the Company issued $114.1 million in aggregate principal amount of 5.00% Convertible Senior Notes due 2024 (the “Convertible Bond Debt”). After deducting debt discount of $1.6 million, the Company received net proceeds of approximately $112.5 million. Additionally, the Company incurred $1.0 million of debt issuance costs relating to this transaction. The Company used the proceeds to partially finance the purchase of six Ultramax vessels and for general corporate purposes, including working capital.

During the three months ended September 30, 2022, the Company repurchased $10.0 million in aggregate principal amount of Convertible Bond Debt for $14.2 million in cash and cancelled the repurchased debt. Accordingly, a $4.2 million loss on debt extinguishment was recorded in the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2022. As a result of these repurchases, the Company’s weighted average diluted shares for the three and nine months ended September 30, 2022 decreased by 296,990 shares.

The Convertible Bond Debt bears interest at a rate of 5.00% per annum on the outstanding principal amount thereof, payable semi-annually in arrears on February 1 and August 1 of each year, which commenced on February 1, 2020. The Convertible Bond Debt may bear additional interest upon certain events, as set forth in the indenture governing the Convertible Bond Debt (the “Indenture”).

The Convertible Bond Debt will mature on August 1, 2024 (the “Maturity Date”), unless earlier repurchased, redeemed or converted pursuant to its terms. From time to time, the Company may, subject to market conditions and other factors and to the extent permitted by law, opportunistically repurchase the Convertible Bond Debt in the open market or through privately negotiated transactions. The Company may not otherwise redeem the Convertible Bond Debt prior to the Maturity Date.

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Each holder has the right to convert any portion of the Convertible Bond Debt, provided such portion is of $1,000 or a multiple thereof, at any time prior to the close of business on the business day immediately preceding the Maturity Date. As of September 30, 2022, the conversion rate of the Convertible Bond Debt after adjusting for a 1-for-7 reverse stock split effected on September 15, 2020 (the “Reverse Stock Split”) and the Company's cash dividends declared through September 30, 2022 is 29.699 shares of the Company's common stock per $1,000 principal amount of Convertible Bond Debt, which is equivalent to a conversion price of approximately $33.67 per share of common stock (subject to further adjustments for future dividends).

Upon conversion of the remaining bonds, the Company will pay or deliver, as the case may be, either cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election, to the holder (subject to shareholder approval requirements in accordance with the listing standards of the Nasdaq Global Select Market).

If the Company undergoes a fundamental change, as set forth in the Indenture, each holder may require the Company to repurchase all or part of their Convertible Bond Debt for cash in principal amounts of $1,000 or a multiple thereof. The fundamental change repurchase price will be equal to 100% of the principal amount of the Convertible Bond Debt to be repurchased, plus accrued and unpaid interest. If, however, the holders instead elect to convert their Convertible Bond Debt in connection with the fundamental change, the Company will be required to increase the conversion rate of the Convertible Bond Debt at a rate determined by a combination of the date the fundamental change occurs and the stock price of the Company's common stock on such date.

The Convertible Bond Debt is the general, unsecured senior obligations of the Company. It ranks: (i) senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Convertible Bond Debt; (ii) equal in right of payment to any of the Company’s unsecured indebtedness that is not so subordinated; (iii) effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and (iv) structurally junior to all indebtedness and other liabilities of current or future subsidiaries of the Company.

The Indenture also provides for customary events of default. Generally, if an event of default occurs and is continuing, then the trustee or the holders of at least 25% in aggregate principal amount of the Convertible Bond Debt then outstanding may declare 100% of the principal of and accrued and unpaid interest, if any, on all the Convertible Bond Debt then outstanding to be due and payable.

In accordance with ASC 470, Debt, (“ASC 470”) the liability and equity components of convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) prior to the adoption of ASU 2020-06 were to be separately accounted for in a manner that reflected the issuer's non-convertible debt borrowing rate. The guidance required the initial proceeds received from the sale of convertible debt instruments to be allocated between a liability component and equity component in a manner that reflected the interest expense at the interest rate of similar non-convertible debt that could have been issued by the Company at the time of issuance. Prior to the adoption of ASU 2020-06, the Company accounted for the Convertible Bond Debt based on the above guidance and attributed a portion of the proceeds to the equity component. The resulting debt discount was amortized using the effective interest method over the expected life of the Convertible Bond Debt as interest expense. Additionally, the debt discount and issuance costs were allocated based on the total amount incurred to the liability and equity components using the same proportions as the proceeds from the Convertible Bond Debt. The Company adopted ASU 2020-06 as of January 1, 2022 and made adjustments to account for the cumulative impact of the adoption. See Note 2, Recent Accounting Pronouncements, for discussion of the impact of ASU 2020-06 on the accounting for the Convertible Bond Debt and the condensed consolidated financial statements upon adoption on January 1, 2022.

Share Lending Agreement

In connection with the issuance of the Convertible Bond Debt, certain persons entered into an arrangement (the “Share Lending Agreement”) to borrow up to 511,840 shares of the Company’s common stock through share lending arrangements from Jefferies LLC (“JCS”), an initial purchaser of the Convertible Bond Debt, which in turn entered into an arrangement to borrow the shares from an entity affiliated with Oaktree Capital Management, LP, one of the Company’s shareholders. The number of shares under the Share Lending Agreement have been adjusted for the Reverse Stock Split. As of September 30, 2022, the fair value of the 511,840 outstanding loaned shares was $22.1 million based on the closing price of the common stock on September 30, 2022. In connection with the Share Lending Agreement, JCS paid $0.03 million representing a nominal fee per borrowed share, equal to the par value of the Company’s common stock.

While the Share Lending Agreement does not require cash payment upon return of the shares, physical settlement is required (i.e., the loaned shares must be returned at the end of the arrangement). In view of this share return provision and other contractual undertakings of JCS in the Share Lending Agreement, which have the effect of substantially eliminating the economic dilution

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that otherwise would result from the issuance of borrowed shares, the loaned shares are not considered issued and outstanding for the purpose of computing and reporting the Company's basic and diluted weighted average shares or net income per share. If JCS were to file bankruptcy or commence similar administrative, liquidating or restructuring proceedings, the Company will have to consider 511,840 shares lent to JCS as issued and outstanding for the purposes of calculating net income per share.

Global Ultraco Debt Facility

On October 1, 2021, Eagle Bulk Ultraco LLC (“Eagle Ultraco”), a wholly-owned subsidiary of the Company, along with certain of its vessel-owning subsidiaries as guarantors, entered into a new senior secured credit facility (the “Global Ultraco Debt Facility”) with the lenders party thereto (the “Lenders”) Credit Agricole Corporate and Investment Bank (“Credit Agricole”), Skandinaviska Enskilda Banken AB (PUBL), Danish Ship Finance A/S, Nordea Bank ABP, Filial I Norge, DNB Markets Inc., Deutsche Bank AG, and ING Bank N.V., London Branch. The Global Ultraco Debt Facility provides for an aggregate principal amount of $400.0 million, which consists of (i) a term loan facility in an aggregate principal amount of $300.0 million (the “Term Facility”) and (ii) a revolving credit facility in an aggregate principal amount of $100.0 million (the “Revolving Facility”) to be used for refinancing the outstanding debt, including accrued interest and commitment fees under the Holdco Revolving Credit Facility, New Ultraco Debt Facility and Norwegian Bond Debt (each as defined in Note 6, Debt, in the Notes to the Consolidated Financial Statements in the Form 10-K) and for general corporate purposes. The Company paid fees of $5.8 million to the Lenders in connection with the transaction.

The Global Ultraco Debt Facility has a maturity date of five years from the date of borrowing on the Term Facility, which is October 1, 2026. Outstanding borrowings bear interest at a rate of LIBOR plus 2.10% to 2.80% per annum, depending on certain metrics such as the Company's financial leverage ratio and meeting sustainability linked criteria. Repayments of $12.45 million are due quarterly and began on December 15, 2021, with a final balloon payment of all outstanding principal and accrued interest due upon maturity. The loan is repayable in whole or in part without premium or penalty prior to the maturity date subject to certain requirements stipulated in the Global Ultraco Debt Facility.

The Global Ultraco Debt Facility is secured by 49 of the Company's vessels. The Global Ultraco Debt Facility contains certain standard affirmative and negative covenants along with financial covenants. The financial covenants include: (i) minimum consolidated liquidity based on the greater of (a) $0.6 million per vessel owned directly or indirectly by the Company or (b) 7.5% of the Company's total debt; (ii) debt to capitalization ratio not greater than 0.60:1.00; and (iii) maintaining positive working capital. As of September 30, 2022, the Company was in compliance with all applicable financial covenants under the Global Ultraco Debt Facility.

Pursuant to the Global Ultraco Debt Facility, the Company borrowed $350.0 million and together with cash on hand repaid the outstanding debt, accrued interest and commitment fees under the Holdco Revolving Credit Facility and New Ultraco Debt Facility. Concurrently, the Company issued a 10-day call notice to redeem the outstanding bonds under the Norwegian Bond Debt. Additionally, in October 2021, the Company entered into four interest rate swaps for the notional amount of $300.0 million of the Term Facility under the Global Ultraco Debt Facility at a fixed interest rate ranging between 0.83% and 1.06% to hedge the LIBOR-based floating interest rate (see Note 5, Derivative Instruments, for additional details).

Interest Rates

2022

For the three and nine months ended September 30, 2022, the interest rate on the Convertible Bond Debt was 5.00%. The weighted average effective interest rate including the amortization of debt discount and debt issuance costs for these periods was 5.25% and 5.35%, respectively.

For the three months ended September 30, 2022, the interest rate on the Global Ultraco Debt Facility ranged from 3.93% to 5.39%, including a margin over LIBOR applicable under the terms of the Global Ultraco Debt Facility and commitment fees of 40% of the margin on the undrawn portion of the revolving credit facility of the Global Ultraco Debt Facility. The weighted average effective interest rate including the amortization of debt discount and debt issuance costs for this period was 4.80%.