Paragon Shipping offers stock for 8 3/8% $25-par notes, to miss coupon

By Angela McDaniels

Tacoma, Wash., Feb. 12 – Paragon Shipping Inc. began an exchange offer and consent solicitation for its 8 3/8% senior notes due 2021, according to a company news release.

The company also said that it will use the 30-day grace period for the quarterly interest payment due on Feb. 15.

However it added that it does not have sufficient liquidity to make the payment.

In the exchange, the company is offering 60 shares of common stock in exchange for each $25.00 principal amount of notes, which includes accrued interest.

Holders who tender by March 4 will receive an early delivery premium of 15 shares for a total of 75 shares per note.

Based on the company’s closing share price on Feb. 12, $0.06 (Nasdaq: PRGN), 75 shares were worth $4.50 and 60 shares were worth $3.60.

As part of the exchange offer, holders will also be required to consent to the removal of some covenants and sections of the note indenture.

The exchange offer and consent solicitation will expire at 11:59 p.m. ET on March 14.

The settlement date is expected to be March 9 for notes tendered by the early delivery deadline and March 17 for notes tendered after the early delivery deadline but on or before the expiration date.

The company said holders who tender and do not withdraw their notes will not be entitled to any future interest on their notes or any accrued interest as of March 14, regardless of when the exchange offer closes.

If all the notes are tendered by the early date, noteholders will own 74% of the company’s stock.

Paragon also said that it is negotiating with its remaining lenders to extend existing covenant waivers and to restructure its outstanding debt, which is secured by its vessels the Coral Seas, Golden Seas, Prosperous Seas, Proud Seas, Precious Seas and Priceless Seas, the company’s entire fleet.

There is a significant risk the company will be unable to negotiate an extension, Paragon said.

The company said that if it is unable to successfully negotiate a restructuring of its current debt it may need to liquidate all of its assets.

The information agent is Georgeson (888 666-2580).

Paragon Shipping is an Athens-based shipping company specializing in the transportation of drybulk cargoes.

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