NOTE F – DEBT OBLIGATIONS

The Company and its domestic subsidiaries (which we sometimes refer to as the “credit parties”) have borrowed money under six secured financing agreements. All six of our principal credit agreements require us to comply with various loan covenants, including financial covenants that require minimum levels of net worth, working capital, liquidity, and interest expense or fixed charges coverage and a maximum amount of debt leverage. Since early 2014, we have struggled to meet certain of our required debt covenants. Consequently, we solicited and received from our lenders amendments to or waivers from various of these covenants to assure our compliance therewith as of the end of the first, third, and fourth quarters of 2014 and the end of the first, second, third and fourth quarters of 2015. For more complete information regarding these historical waivers, see the discussion of our debt covenant compliance set forth in our periodic reports filed since January 1, 2014 with the SEC and as set forth in this Annual Report on Form 10-K.

Since late September 2015, our lenders and lessors have provided a series of additional covenant default waivers, including waivers granted in connection with recent credit facility amendments entered into on or prior to November 16, 2015. These amendments also effected a series of additional substantive amendments to each of our six credit facilities, including but not limited to accelerated repayment terms, increased interest rates, and required asset divestitures by specified milestone deadlines and specified amounts. Since November 16, 2015, we have received various additional types of relief from our lenders to address certain covenant defaults and to authorize changes to our divestiture plans. Please refer to “Recent Financing Agreement Waivers and Amendments” below for further details regarding these waivers and amendments.

If we are unsuccessful in disposing of certain non-core assets by the milestones and at specified amounts agreed to with our lenders and lessors, we would be in default under one or more of our credit facilities and all of our creditors would have the right to accelerate our debt. As a result of the matters described herein, including the uncertainty regarding our ability to fully execute the Strategic Plan, our lenders’ abilities to demand payment under our debt agreements and our limited refinancing prospects, there is substantial doubt about our ability to continue as a going concern.

Because of the uncertainties associated with our ability to implement the Strategic Plan within the required time constraints, since September 30, 2015, we have classified all of our debt obligations (net of deferred debt issuance costs), which was approximately $156.8 million at December 31, 2015, as current, which has caused our current liabilities to far exceed our current assets since such date.

Our Strategic Plan contemplates that we will seek to divest certain assets at specific prices and deadlines with a substantial part of the proceeds used to pay down our debt. We have already completed several planned asset sales, but still need to complete several other sales or negotiate alternative transactions to fully meet our objectives under the plan. If we are fully successful in executing the remainder of our Strategic Plan as modified to date under presently prevailing conditions, we currently estimate that our gross debt obligations would be reduced from $159.8 million as of December 31, 2015 to a range of $100.0 million to $110.0 million as of June 30, 2016, excluding any new financings that could take place. In our quarterly report on Form 10-Q for the quarter ended September 30, 2015, we projected a range of $85.0 million to $95.0 million. The increase in our estimate is primarily due to lower than expected sales prices received, as well as the exchange of our equity share in mini-bulkers, which we had originally intended to monetize, for 100% ownership of a 2008 built mini-bulker. While we have classified all of our outstanding debt as current on our consolidated balance sheet as of December 31, 2015, none of our creditors have thus far accelerated our debt and demanded immediate full payment (except for mandatory prepayments in connection with the sale of specified collateral).

During 2015, we adopted ASU 2015-03 and, as a result, reclassified approximately $2.9 million of deferred debt issuance costs from deferred charges, net of accumulated amortization to offset against long-term debt on our Consolidated Balance Sheet as of December 31, 2014. As of December 31, 2015, the amount of deferred debt issuance costs was $3.0 million and was included as an offset to current maturities of long-term debt on our Consolidated Balance Sheet.

Credit Facility

We currently maintain a senior secured credit facility with Regions Bank (“Credit Facility”), which we amended on November 13, 2015. At December 31, 2015, the Credit Facility, as amended, provided up to $71.3 million which was comprised of a term loan facility in the principal amount of $33.1 million and a revolving credit facility (“LOC”) permitting draws in the principal amount of up to $38.2 million. At December 31, 2015, the LOC included a $7.2 million sublimit for the issuance of standby letters of credit and a $5.0 million sublimit for swingline loans. As of December 31, 2015, we had $31.0 million of borrowings and $7.2 million of letters of credit outstanding under our LOC. We currently have no additional borrowing capacity under this facility. For more information, refer to “Recent Financing Agreement Waivers and Amendments” below.

Under the Credit Facility, each of our domestic subsidiaries is a joint and several co-borrower. The obligations of all the borrowers under this facility are secured by all personal property of the borrowers, excluding certain real property, but including the U.S. flagged vessels owned by our domestic subsidiaries and collateral related to such vessels. Several of our International flagged vessels are pledged as collateral securing several of our other secured debt facilities.

The Credit Facility includes usual and customary covenants and events of default for credit facilities of its type. Our ability to borrow under the Credit Facility is conditioned upon continued compliance with such covenants, including, among others, (i) covenants that restrict our ability to engage in certain asset sales, mergers or other fundamental changes, to incur liens or to engage in various other transactions or activities and (ii) various financial covenants, including those stipulating as of December 31, 2015 that we maintain a consolidated leverage ratio not to exceed 5.0 to 1.0, an EBITDAR to fixed charges ratio of at least 1.05 to 1.0, liquidity of not less than $20.0 million, and a consolidated net worth of not less than the sum of $228.0 million, minus impairment losses, plus 50% of our consolidated net income earned after December 31, 2011, excluding impairment losses, plus 100% of the proceeds of all issuances of equity interests received after December 31, 2011 (with all such terms or amounts as defined in or determined under the Credit Facility). As of December 31, 2015, the lender agreed to waive our default of the consolidated net worth, minimum liquidity, consolidated fixed charge coverage ratio and the consolidated leverage ratio covenants for a temporary period ending March 31, 2016. For more information, refer to “Recent Financing Agreement Waivers and Amendments” below.

Other Financing Agreements

On April 24, 2015, we entered into a new loan agreement with DVB Bank SE in the amount of $32.0 million by refinancing our 2010 built PCTC. We received the loan proceeds on April 24, 2015 and applied them as follows: (i) $24.0 million to pay off an outstanding Yen facility in the amount of 2.9 billion Yen, (ii) $4.0 million to settle the related Yen forward contract, and (iii) $2.9 million to settle a Yen denominated interest rate swap. Under the DVB loan agreement, interest was, prior to a recent loan amendment, payable at a fixed rate of 4.16% with the principal being paid quarterly over a five-year term based on a ten-year amortization schedule with a final quarterly balloon payment of $16.8 million due on April 22, 2020. Our 2010-built foreign flag PCTC along with customary assignment of earnings and insurances are pledged as security for the facility. As a result of the early debt payoff, we recorded a loss on extinguishment of debt of approximately $0.3 million. Additionally, we capitalized approximately $0.6 million in loan costs associated with the DVB Bank loan. On November 4, 2015, this loan agreement was materially amended. Pursuant to the terms of the amendment, in December 2015 we sold our 2010 built PCTC and used the net proceeds to retire the loan. Refer to “Recent Financing Agreement Waivers and Amendments” for additional information.

During the first quarter of 2015, we paid off approximately $13.5 million in debt in connection with the sale of one of our handysize vessels. Additionally, we wrote off approximately $95,000 of unamortized loan costs associated with the debt instrument which is reflected in loss on extinguishment of debt on our Consolidated Statements of Operations.

As of December 31, 2015 and 2014, our debt obligations are summarized as follows:



(All Amount in Thousands)	Interest Rate				Maturity	Principal Balance
Description of Secured Debt	2015		2014		Date	2015		2014
ING – Variable Rate 1	4.6930	%	2.7471	%	2018	$	8,589	$	12,025
ING – Variable Rate 1	4.6947-4.7336	%	2.7312-2.7324	%	2018		25,146		41,400
Capital One N.A. – Variable Rate 2	2.5938	%	2.5050	%	2017		6,904		9,144
ING – Variable Rate 1	4.8199	%	2.7350	%	2018		2,800		15,394
Regions – Variable Rate 3	9.4400	%	3.9900	%	2017		33,090		41,906
DVB Bank SE – Fixed Rate 4	6.3500	%	4.3500	%	2020		33,664		37,759
RBS – Variable Rate 5	3.9900	%	2.9195	%	2021		18,651		21,943
DVB Bank SE – Variable Rate 6			3.6100	%	2020		-		24,812
Note Payable - Mortgage 7							-		5
Regions Line of Credit 3	9.4400	%	3.9100	%	2017		31,000		38,500
							159,844		242,888
			Less: Current Maturities				(156,807)		(23,367)
			Less: Debt Issuance Costs				(3,037)		(2,870)
						$	-	$	216,651

1.We entered into a variable rate financing agreement with ING Bank N.V, London branch in August 2010 for a seven year facility to finance the construction and acquisition of three handysize vessels. Pursuant to the terms of the facility, the lender agreed to provide a secured term loan facility divided into two tranches which corresponded to the vessel delivery schedule. Tranche I covered the first two vessels delivered with Tranche II covering the last vessel. Tranche I was fully drawn in the amount of $36.8 million, and Tranche II fully drawn at $18.4 million. We entered into a variable rate financing agreement with ING Bank N.V., London branch in June 2011 for a seven year facility to finance the acquisition of a capesize vessel and a supramax bulk carrier newbuilding, both of which we acquired a 100% interest in as a result of our acquisition of Dry Bulk. Pursuant to the terms of the facility, the lender agreed to provide a secured term loan facility divided into two tranches: Tranche A, fully drawn in June 2011 in the amount of $24.1 million, and Tranche B, providing up to $23.3 million of additional credit. Under Tranche B, we drew $6.1 million in November 2011 and $12.7 million in January 2012. In order to aid in the collateral value coverage covenant, both of the above facilities were merged into one facility without altering the debt maturities or terms of our indebtedness. Effective November 4, 2015, the interest rate was increased from LIBOR plus 2.5% to LIBOR plus 4.5%. For other changes to this credit facility, including the sales of the related vessels, refer to “Recent Financing Agreement Waivers and Amendments” below.

2.In December 2011, we entered into a variable rate financing agreement with Capital One N.A. for a five year facility totaling $15.7 million to finance a portion of the acquisition price of a multi-purpose ice strengthened vessel. This loan requires us to make 59 monthly payments with a final balloon payment of $4.7 million in January 2017.

3.Our original senior secured Credit Facility matured on September 24, 2018 and included a term loan facility in the principal amount of $45.0 million and a LOC in the principal amount up to $40.0 million. The LOC facility originally included a $20.0 million sublimit for the issuance of standby letters of credit and a $5.0 million sublimit for swingline loans. As discussed above, on November 13, 2015, the Credit Facility was amended. The maturity date was accelerated to July 20, 2017. Additionally, the interest rate increased from LIBOR plus 3.5% to LIBOR plus 9.25% which is effective from November 13, 2015 through June 30, 2016 and LIBOR plus 10.0% from July 1, 2016 through July 20, 2017. For other changes to the credit facility, refer to “Recent Financing Agreement Waivers and Amendments” below.

4.We entered into a fixed rate financing agreement with DVB Bank SE, on August 26, 2014 in the amount of $38.5 million, collateralized by our 2007 PCTC at a rate of 4.35% with 24 quarterly payments with a final balloon payment of $20.7 million in August 2020. This loan requires us to pre-fund a one-third portion of the upcoming quarterly scheduled debt payment, which, at December 31, 2015, constituted $0.5 million and is included as restricted cash on our Consolidated Balance Sheet. Effective November 4, 2015, the interest rate increased from 4.35% to 6.35%. For other changes to the credit facility, refer to “Recent Financing Agreement Waivers and Amendments” below.

5.In August 2014, we paid off our $11.4 million loan with DNB Bank and obtained a new loan with RBS Asset Finance in the amount of $23.0 million collateralized by one of our 1999 PCTCs at a variable rate equal to the 30-day Libor rate plus 2.75% payable in 84 monthly installments with the final payment due August 2021. Late in 2015, this loan was amended to include an increase to the interest rate of 1.0%. For additional changes to this facility, refer to “Recent Financing Agreement Waivers and Amendments” below.

6.As discussed in greater detail above, in April of 2015, we obtained a new loan with DVB Bank SE in the amount of $32.0 million. In connection with implementing our Strategic Plan, in December 2015 we used net proceeds from a vessel sale to pay off this loan in full.

7.Represents additional bank financing to fund the construction and renovation of our office building in New Orleans, Louisiana. This asset is included in assets held for sale at December 31, 2015 – refer to Note E – Assets Held for Sale.

Recent Financing Agreement Waivers and Amendments

On or prior to November 16, 2015, we amended each of our credit facilities. Each of these amendments included provisions extending the lenders’ prior covenant breach waivers through March 31, 2016 and provided us relief from testing compliance of most of these covenants until June 30, 2016. These waivers are temporary one-time waivers, and the lenders have no obligation, express or implied, to waive any other defaults or grant any other extensions. The waivers are contingent upon our continued performance with the terms of the credit facilities, as amended, including newly-implemented requirements to sell certain specified non-core assets at certain specified prices by certain specified dates (ranging from December 4, 2015 to June 30, 2016) and to apply substantially all of the net proceeds from such sales to retire debt owed under such facilities.

Some of the more significant amendments to our Senior Credit Facility with Regions Bank included (i) accelerating the facility’s maturity date from September 24, 2018 to July 20, 2017, (ii) reducing the Letter of Credit Sublimit from $20.0 million to $7.2 million initially and to lower amounts at future dates, (iii) prohibiting us from issuing new letters of credit without the lenders’ consent, (iv) reducing the Aggregate Revolving Commitment by $1.8 million, (v) increasing the applicable margins for all Loans, Letter of Credit Fees and Commitment Fees set to 9.25% from the effective date of the amendment through June 30, 2016, and 10.0% from July 1, 2016 through the maturity date, (vi) increasing our scheduled payments for the next twelve months by $3.0 million and mandating certain specified mandatory prepayments, (vii) prohibiting us from paying common stock dividends unless we have at least $30.0 million of liquidity (as defined in the credit facility) after making the payment, (viii) prohibiting us from paying preferred stock dividends prior to January 29, 2016 or paying preferred stock dividends thereafter unless various financial conditions are met, (ix) prohibiting us from making any further payments to construct our New Orleans headquarters, except to the extent financed by the general contractor, and (x) amending certain of our financial covenants, effective as of June 30, 2016, and amending certain of our other loan covenants to further restrict our operations, effective immediately. Additionally, Regions Bank appointed a financial consultant to review our financial results.

With respect to our two credit facilities with DVB Bank SE, the more significant amendments included (i) requiring us to apply the proceeds from the sale of one of our PCTCs to pay down 100% of the debt owned under one facility of approximately $30.2 million and $912,000 of the debt owed under the other facility, (ii) pledging under certain circumstances 65% of our shares of our wholly-owned Singapore subsidiaries to DVB Bank SE, (iii) increasing the interest rate by 2%, (iv) increasing by approximately $222,000 our quarterly principal payments and (v) specifying various dates (ranging from December 2015 through March 2016) by which our sale of non-core assets must be completed and at specified amounts. In accordance with these amended terms, we sold the 2010 built PCTC and used the proceeds to pay down the related debt by approximately $31.3 million, and we retained excess cash of approximately $15.4 million for general corporate purposes. In addition, we wrote off related unamortized loan costs of $130,000, which we included in loss on extinguishment of debt in our Consolidated Statement of Operations for the year ended December 31, 2015.

With respect to our credit facility with ING Bank N.V., some of the more significant amendments included (i) increasing by approximately $625,000 our quarterly principal payments, (ii) increasing our interest rate margin by approximately 2% per annum, (iii) modifying the manner in which we will be required to pay down debt owed under the facility upon the sale of assets comprising collateral under the facility, including requiring any excess proceeds to be applied to pay off the other tranches at the discretion of the facility’s agent, (iv) providing credit enhancements of equal value to those afforded by us to our other creditors, (v) prohibiting the payment of common stock dividends, (vi) prohibiting the payment of preferred stock dividends without the written consent from the lender, (vii) requiring the preparation of a financial plan acceptable to the facility agent in its sole discretion, and (viii) specifying various amounts and dates in December 2015 by which our sale of non-core assets must be completed. Pursuant to the terms of this amendment, we sold our supramax vessel, which allowed us to reduce our debt outstanding by approximately $11.3 million. In conjunction with this sale, we wrote off approximately $100,000 of unamortized loan costs, which we included in loss on extinguishment of debt. Subsequent to December 31, 2015, we completed the sales of the remaining two handysize vessels and the capesize bulk carrier – refer to Note Y – Subsequent Events.

RBS Asset Finance has agreed to extend its prior covenant default waiver through March 31, 2016 and to provide relief from testing compliance of these covenants until June 30, 2016, together with amendments increasing the interest rate 1.0% per annum, requiring a loan-to-value ratio as of April 1, 2016 not to exceed 75.0% and modifying the covenants in a manner substantially similar to those reflected in the Regions Bank amendment.

Most of our remaining November 2015 credit facility amendments included less substantial changes, principally with respect to amending certain of our financial covenants, effective March 31, 2016 or thereafter, or requiring us to provide equal treatment if and to the extent we provide credit enhancements to other of our creditors.

In the weeks following our receipt of debt covenant waivers on or about November 16, 2015, it became apparent that market conditions were too weak for us to implement our divestiture plans on the terms and conditions contemplated in our contractual arrangements with our lenders. Consequently, following November 16, 2015 we requested various types of relief from our lenders to address several covenant defaults and to authorize changes to our divestiture plans. On or about December 22, 2015, we obtained consent agreements from certain of our lenders modifying the parameters of our pending asset dispositions, including (i) extending the deadlines for certain pending sales from late 2015 to various dates throughout the first quarter of 2016 and (ii) lowering various required sales prices. We received substantially similar consent agreements from our remaining lenders in early 2016. We will likely continue to be required to seek additional waivers, particularly if our divestiture plans change – see Note Y – Subsequent Events for a summary of various amendments, waivers and discussions with our lenders since December 31, 2015.

In connection with entering into these above-described amendments, we have further agreed to pay various fees to our lenders and lessors and to reimburse them for various of their costs incurred in connection with the amendments or their future monitoring of our financial position or performance. We have also agreed to take or omit to take various other actions designed to protect the interest of the creditors, including agreements to create various earnings or retention accounts, to provide enhanced information about our financial position or performance, to deliver certain appraisals and to provide certain subordination undertakings.

The descriptions of our recent credit facility amendments set forth above are general summaries only, and are qualified in their entirety by reference to the full text of those amendments filed as exhibits with this 2015 Form 10-K.

Our future compliance with our covenants and amended loan terms is contingent upon the successful execution of the remainder of our Strategic Plan and improved financial results, particularly with respect to our Jones Act segment. If we are unsuccessful in disposing of certain non-core assets by the milestones and at specified amounts agreed to with our lenders and lessors, we would be in default under one or more of our credit facilities and all of our creditors would have the right to accelerate our debt. As a result of the matters described herein, including the uncertainty regarding our ability to fully execute the Strategic Plan, our lenders’ abilities to demand payment under our debt agreements and our limited refinancing prospects, there is substantial doubt about our ability to continue as a going concern.

Guarantees

In addition to the obligations discussed above, at December 31, 2015 we guaranteed two separate loan facilities of two separate shipping companies in which one of our wholly-owned subsidiaries has indirect ownership interests. With respect to one of the two loan facilities of these shipping companies, in which our wholly-owned subsidiary indirectly owned a 25% interest at December 31, 2015, we guaranteed 5% of the amount owed under the loan facility. As of December 31, 2015 and December 31, 2014, this guarantee obligation equated to approximately $3.4 million and $3.8 million, respectively. Under the second facility, in which our wholly-owned subsidiary indirectly owned approximately 23.7% of the borrower at December 31, 2015, we guaranteed only $1.0 million of the approximately $11.0 million loan facility. This second guarantee is non-amortizing. During 2016, in connection with the exchange of our interests in both of these entities for a mini-bulk carrier, we expect that these guarantees will be discharged. See Note Y – Subsequent Event for additional information.