UPDATE 1-JP Morgan cuts Eagle Bulk, Navios Maritime Partners

Thu Nov 20, 2008 8:49am EST

(Recasts; adds analyst comments)

Nov 20 (Reuters) - J.P. Morgan Securities downgraded Eagle Bulk Shipping Inc (EGLE.O), and said all drybulk companies under its coverage, except Diana Shipping Inc (DSX.N), may be in breach of debt covenants if the market value of assets have significantly fallen.

The brokerage, which also downgraded Navios Maritime Partners LP (NMM.N), upgraded Diana Shipping as it believes the company has the best financial status to survive the current downturn hitting the dry bulk sector.

Although sale and purchase activity had resumed in the dry bulk sector after several weeks of a slump, there was a big drop in asset sales prices, analyst Jonathan Chappell said.

"After a long absence of second-hand vessel sales during the accelerating rate decline since the end of the summer, a couple of modern ships have now been sold at prices that are more than 50 percent below last-done deals for similar assets," Chappell said in a note to clients.

Eagle Bulk Shipping, Navios Maritime Partners, Genco Shipping & Trading Ltd (GNK.N) and Navios Maritime Holdings Inc (NM.N) could "technically be in breach of debt covenants" if the lower asset prices are proven to be new market levels, the analyst said.

Eagle Bulk Shipping's rating was cut to "underweight" from "neutral," while Navios Maritime Partners was downgraded to "neutral" from "overweight." Diana Shipping was upgraded to "overweight" from "neutral."

"Given the massive volatility of the dry bulk stocks and the ongoing unfavorable industry data points, we believe it is far less risky to use pair trades in this sector with a focus on financial risk and liquidity," Chappell said.

Shares of Diana Shipping closed at $8.55, while those of Navios Maritime Partners closed at $4.77 Wednesday on the New York Stock Exchange. Shares of Eagle Bulk closed at $6.45 on Nasdaq. (Reporting by Arup Roychoudhury in Bangalore; Editing by Pratish Narayanan)