Volume Spike Investor

Britannia Bulk Holdings Inc. (NYSE: DWT) is an international provider of dry bulk shipping and maritime logistics services with a focus on transporting dry bulk commodities in and out of the Baltic region.  It has said that it expects to announce a significant net loss from the substantial decreases in dry bulk charter rates. that occurred during the period, exacerbated by the Company’s increase in chartered-in capacity during the same period and its entry into the forward freight agreements (”FFAs”) and a bunker fuel hedge more fully described below.

This stock is down over 80% at $0.25 and its prior 52-week trading range had been $1.85 to $14.47.  This one is trading as though it is about to be a sunken ship with no treasure future generation salvage possibilities. Here is a detailed update on the company’s loss expectations and how it is spelling out its future.  If you haven’t seen someone make all the wrong bets on all teh wrong issues, this looks like a perfect example.

The company’s Forward Freight Agreements, or FFA derivatives, do not qualify for hedge accounting.  Since July 2008, Britannia bought FFAs that appear not to have been purchased to hedge identifiable ship or cargo positions resulting in Britannia being more exposed to the falling charter rates and reduced overall demand for dry bulk shipping services than it would have been if its historic practice of using FFAs as economic hedges had been followed.   The company entered into a bunker fuel hedge which is currently uncompetitive because it is hedged to prices which are significantly above the current market price of bunker fuel, making hedging losses significant.

The Board is currently conducting extensive discussions with management to identify and implement any necessary changes.  Britannia has engaged AlixPartners to assist management in discussions and negotiations with the Company’s lenders and trade counterparties and to address Britannia’s current financial and liquidity issues.

On May 23, 2008, its Britannia Bulk Plc subsidiary into a $170.0 million term loan facility with Lloyds TSB Bank Plc and Nordea Bank Denmark A/S, which is secured by twenty two vessels in the Company’s owned fleet. Approximately US $158.0 million is currently outstanding under the Facility.

The Company is not currently in violation of its financial covenants, but Britannia says it is in a very high risk of a future violation of one or more financial covenants in the near term.

The Company is in discussions with the lenders under the facility, but in either case (an accommodation with the lenders or a liquidation, administration or bankruptcy), it is unlikely that the Company’s shareholders would realize much, if any, value.

Britannia has determined that it will not pay a dividend on its common shares for the quarter ended September 30, 2008, nor does ity expect to pay a dividend for the foreseeable future.

Jon C. Ogg
October 28, 2008