NEW YORK (PNN) - January 7, 2015 - Another day, another fresh all-time record low in The Baltic Dry Index as Deutsche Bank's "perfect storm" appears ever closer on the horizon. Plunging 4.7% overnight to 445 points, this is 20% lower than the previous record low in 1986 and as one strategist warns, "It’s a brutal start of the year; there’s just nowhere to hide on the market."

"This looks like a ripple effect from what happened back in August," adds Alexandre Baradez, chief market analyst at IG France, hopefully looking forward, "it might continue for a few weeks, but given China’s central bank firepower, it shouldn’t last for more than that."

But Deutsche's "perfect storm" looms...

The improvement in dry bulk rates we expected into year-end has not materialized. Based on conversations we've had with several industry contacts, we believe a number of dry bulk companies are contemplating asset sales to raise liquidity, lower daily cash burn, and reduce capital commitments. The glut of "for sale" tonnage has negative implications for asset and equity values. More critically, it can easily lead to breaches in loan-to-value covenants at many dry bulk companies, shortening the cash runway and likely necessitating additional dilutive actions.

Dry bulk companies generally have enough cash for the next year or so, but most are not well positioned for another leg down in asset values.

The majority of publicly listed dry bulk companies have already taken painful measures to adapt to the market - some have filed Chapter 11, others have issued equity at deep discounts, and most have tried to delay/defer/cancel new building deliveries.

The additional cushion, however, is likely not enough if asset values take another leg down; especially given the majority of publicly listed dry bulk companies are already near max allowable LTV levels.

The move to sell assets in unison can lead to a downward spiral, where the decline in values leads to an immediate need for additional equity to cure LTV breaches.