Star Bulk Carriers of Greece has, as expected, elected to redeem a $69m obligation in convertible notes that was inherited from acquired Eagle Bulk Shipping by paying off the debt’s holders in shares.

The Petros Pappas-led, New York-listed dry bulk giant confirmed that it is issuing nearly 6m new common shares worth close to $135m to pay off the notes, which matured on Thursday.

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Star’s action confirms an account in Streetwise, TradeWinds’ financial newsletter, which outlined on Wednesday the reasons behind its decision to issue more stock rather than pay off the debt in cash, which was the other option.

The notes are what is left of a $114m convertibles issuance by the former Eagle Bulk in 2019, proceeds of which were used to pay for the acquisition of six ultramaxes and help fund the installation of exhaust gas scrubbers.

Star essentially inherited the bonds when it closed an $836m all-shares deal in April to acquire Eagle Bulk.

The notes were what financiers describe as deeply “in the money”. They featured a conversion or “strike price” of $11.61 per share. Star closed trading on Wednesday at $22.54.

Each convertible holder is entitled to 86 Star shares for each $1,000 worth of bonds held. The notes also paid interest of 5% per year prior to conversion.

Paying off the bonds with cash would have reduced Star’s balance sheet liquidity by about $135m.

Instead, its market capitalisation now increases by roughly the same amount while it wipes $69m worth of debt off the books.

Star said its new shares count is 118.8m and its revised outstanding debt comes to $1.381bn.

Star Bulk has a fleet of 156 owned vessels, with an aggregate capacity of 15m dwt, ranging from newcastlemaxes to supramaxes.

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