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Subject:  Re: NM Q3 Date:  11/26/2012  11:40 AM
Author:  brewer12345 Number:  2784 of 3371

The charter default insurance was providing NM nice continuation of revenue if a charter failed.
This is especially true given the price paid for some of the Capes, and the attached charters.
It will be interesting to see how much debt NM decides to pay down.


Basically NM monetized the insurance they had on the failed charters and got a lump sum (plus some continuing coverage), and the insurer will be exiting the business. Not being able to get coverage going forward will eventually matter, but at this point in the cycle it is a moot point. Why? Simply put, they no longer have anything ov value to insure. Look at where day rates are. They are low enough that a default would simply have NM recharter at a similar rate. Day rates cannot drop much because owners wills crap and park ships. If they could get long term charters at $40k/day, I would be worried. But when a 1 year deal for a cape is mid teens or lower, there isn't really much of value to bother insuring. When this will matter is when rates bounce in a serious way. But that could be a while.

NM already has said that thery are planning to pay down something like $25MM ion debt and keep the rest of the proceeds as cash. This is contongent on their banks agreeing, but they likely would not have said this to the market if the banks were not largely on board already. I expect the rest of the proceeds will be used for fleet expansion/renewal.

Since NM basically gained some value (arguably, and not much) on this deal, it doesn't really change the picture for them. They are in good shape through next year.