Genco Shipping & Trading Limited (GNK), Eagle Bulk Shipping Inc. (EGLE): The Danger and Opportunity in This Sinking Sector

You see, when we look for the immediate insolvent candidates, we must turn our focus on the debt component in the balance sheet. Precarious, debt- loaded balance sheets don’t inspire confidence. Take a look at the table below.

Company Market Cap Cash Total Debt ’13 EPS estimate
EGLE 82 M 18.2M 1.15B -7.34
EXM 53 M 27.24M 1.07B -1.86
GNK 71 M 65.2M 1.58B -3.83
There’s simply no way for Eagle Bulk Shipping Inc. (NASDAQ:EGLE) and Excel to pay back their massive debts. With only $18 million and $27 million of cash, respectively, you can’t pay back mounting debts in excess of $1 billion. And that’s even if Eagle Bulk Shipping Inc. (NASDAQ:EGLE) and Excel were indeed profitable, which they aren’t. They are losing cash, not making it. Of the three, Genco Shipping & Trading Limited (NYSE:GNK) stands a slightly better chance to service its debt. With a relatively low total debt and a better cash cushion – Genco Shipping & Trading Limited (NYSE:GNK) might actually survive. But this decision belongs to its creditors. It’s up for them to decide whether they agree to postpone debt payments in return for Genco Shipping & Trading Limited (NYSE:GNK)’s shares.

The Fool thinks shipping

I believe that the shipping sector is poised to be an incredible contrarian trade at some point in time. Shipping companies can’t afford to operate. They’re declaring bankruptcy every month. Day rates are at rock bottom. The main risk is that sectors can wallow at the bottom for much longer than anyone expects. If they do, make sure to stay away from our top three potentially insolvent candididates.

The article The Danger and Opportunity in This Sinking Sector originally appeared on

Shmulik Karpf has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Shmulik is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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