(EXM) Excel Maritime Carriers Improves TC Contract

Excel Maritime Carriers Ltd. (EXM), a leading worldwide seaborne transporter for dry bulk cargoes, recently improved and consolidated the time charter contracts for its fleets. The company announced that it has entered into 2-year time charter agreement with first class European charterers for 2 of its Kamsarmax vessels, M/V Coal Hunter and M/V Santa Barbara.

The gross daily average TC rate will be $15,000 for the first year. For the second year, the daily TC rate will be linked to Baltic Panamax Index with a floor rate of $14,000 per day coupled with a profit sharing agreement. With these two new time charter deals, currently Excel Maritime secured under time charter employment of 74% of its operating days for the rest of 2011.

The situation has markedly improved from where it was at the end of the first quarter of 2011. At that time, management announced that it secured just 65% of its operating days for the rest of 2011under time charter employment.

Excel Maritime also secured under time charter employment of 92% and 79% of operating days for its Capesize vessels for fiscal 2011 and 2012, respectively. Reduction of large spot exposure will undoubtedly help Excel Maritime to consolidate its financials going forward.

The drybulk shipping industry is going through a very difficult time, when the spot vessel rates collapsed even below the rate during the recession.

We believe the sole reason for this dismal condition is the sheer increase of ships under operation that resulted in intense price competition. Furthermore, Excel Maritime took a severe hit on its time charter equivalent rate in the last quarter.In the first quarter of 2011, the realized average daily time charter equivalent rate of Excel Maritime was $19,642, a stiff reduction of nearly 19.7% year over year.

Excel Maritime operates under highly competitive drybulk shipping industry. Its main competitors are Diana Shipping Inc. (DSX), Genco Shipping & Trading Ltd. (GNK), and DryShips Inc. (DRYS). We maintain our long-term Underperform recommendation on Excel Maritime. Currently, it holds a short-term Zacks #4 Rank (Sell) on the stock.

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