And,
As of December 31, 2013, our outstanding indebtedness was $234.6 million. Despite our restructuring efforts, as of May 8, 2014, we continue to have a substantial amount of indebtedness amounting to approximately $159.9 million, excluding the BCF of the 7% Notes (excluding the share settled debt and redeemable preference shares with Ironridge Global IV, Ltd).
Although it is likely that any agreements governing our future indebtedness, including the terms of any indebtedness remaining outstanding as a result of the restructuring, will contain limitations on our ability to incur indebtedness, the covenants in such debt agreements typically contain a number of exceptions. As such, we may still be able to incur a significant amount of additional indebtedness. Our high level of indebtedness could have important consequences to our shareholders.
As discussed elsewhere in this annual report, we are currently unable to meet certain of our debt service requirements and our indebtedness remains significant. In addition, subsequent to the restructuring, our owned fleet consists of two dry bulk vessels and, as a result, we now have significantly fewer vessels from which we will be able to generate revenue. Furthermore, although we have entered into new business arrangements for the purchase and trading of coal, these business arrangements remain subject to significant risks and we have not yet commenced operations. See “Risks Relating to Our Coal Business” below. Since our relative leverage continues to remain high after our restructuring, and since we have a diminished basis from which we can generate revenue, and since our recent coal mining acquisitions have not yet fully commenced operations, there is no assurance we will be able to service our significant indebtedness.
Because we are highly leveraged, we will continue to remain subject to the following risks:
• our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, vessel or other acquisitions or general corporate purposes may be impaired in the future;
• if new debt is added to our debt levels, the related risks that we now face would increase and we may not be able to meet all of our debt obligations;
• a substantial portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes, and there can be no assurance that our operations will generate sufficient cash flow to service this indebtedness;
• we will be exposed to the risk of increased interest rates because our borrowings under facility agreements will be at variable rates of interest;
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• it may be more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness and the cross-acceleration or cross-default of our other indebtedness;
• we may be more vulnerable to general adverse economic and industry conditions;
• we may be at a competitive disadvantage compared to our competitors with less debt or comparable debt at more favorable interest rates;
• our ability to refinance indebtedness may be limited or the associated costs may increase; and
• our flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited, or we may be prevented from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins or our business.
Highly leveraged companies are significantly more vulnerable to unanticipated downturns and setbacks, whether directly related to their business or flowing from a general economic or industry condition, and therefore are more vulnerable to a business failure or bankruptcy. Accordingly, it also heightens the risk of owning our securities.
The market values of our vessels and the related charters, if applicable, have declined and may further decrease, which could lead to the loss of our vessels and/or we may incur a loss if we sell vessels following a decline in their market value.