5/18/2014 Genco Shipping Files for Bankruptcy Amid Weak Charter Rates (1) - Businessweek

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Genco Shipping Files for Bankruptcy Amid
Weak Charter Rates (1)
By Dawn McCarty April 21, 2014
Peter Georgiopouloss Genco Shipping & Trading Ltd. (GNK:US), an operator of dry-bulk cargo ships, filed
for bankruptcy as weakness in charter rates made it difficult for the company to pay its creditors.
The shipping industry has suffered from a glut of vessels after buying too many before the 2008 global recession,
driving down rates and saddling companies with debt, said Erik Nikolai Stavseth, an Oslo-based analyst at
Arctic Securities ASA.
They were all victims of the exuberance we saw in the shipping market in the mid- to late-2000s, Stavseth said
in an interview before the bankruptcy filing. High leverage on expensive assets is what killed them.
Genco, which owns or operates vessels that transport iron ore, coal, grain, steel and other products worldwide,
listed assets of $2.4 billion and debt of $1.5 billion in a Chapter 11 filing today in U.S. Bankruptcy Court in
Manhattan.
Georgiopopuloss General Maritime Corp., which operates in more than 230 ports in more than 70 countries,
filed for bankruptcy in November 2012. Its restructuring gave Oaktree Capital Management LP most of the
companys new stock.
Other ocean-transport companies have sought bankruptcy protection since the financial crisis, including
Overseas Shipholding Group Inc. in 2012 and Excel Maritime Carriers Ltd., which filed last year and emerged
on Feb 14.
Shipping Stakes
Gencos assets (GNK:US) include stakes in Baltic Trading Ltd. and Jinhui Shipping & Transportation Ltd. A
year ago, the debt (GNK:US) was $300 million higher than the market value of the assets, Omar Nokta, a New
York-based analyst at Global Hunter Securities LLC, said in a Feb. 24 report.
Genco, based in New York, said in an April 3 regulatory filing that it had reached an agreement with a majority
of lenders that includes converting a 2007 credit line into 81.1 percent of the equity in the reorganized company.
About $1.1 billion was outstanding on that loan on Sept. 30, according to data compiled by Bloomberg. The
companys $125 million of convertible securities would be swapped for 8.4 percent of the equity, according to
5/18/2014 Genco Shipping Files for Bankruptcy Amid Weak Charter Rates (1) - Businessweek
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the April 3 filing. Current equity holders would get seven-year warrants for a 6 percent stake.
Bond Payment
Before the filing, Genco hired Blackstone Advisory Partners LP to explore a debt restructuring. Lenders agreed
to waive default after Genco missed a $3.1 million interest payment on its convertible bond, according to a filing
with the U.S. Securities and Exchange Commission. Genco made the payment on March 20.
The dry-bulk shipping market is recovering from the biggest glut in history, according to Clarkson Plc, the
worlds largest shipbroker. The fleet has swelled 84 percent since 2008 while trade advanced 31 percent,
according to Clarksons data.
Genco owns 53 dry-bulk carriers, consisting of nine Capesizes, eight Panamaxes, 17 Supramaxes, six
Handymaxes and 13 Handysizes, according to its website. Capesizes are the largest, and Handysizes the
smallest, by carrying capacity.
The case is In re Genco Shipping & Trading Ltd., 14-bk-11108, U.S. Bankruptcy Court, Southern District of
New York (Manhattan).
To contact the reporter on this story: Dawn McCarty in Wilmington, Delaware, at dmccarty@bloomberg.net
To contact the editors responsible for this story: Andrew Dunn at adunn8@bloomberg.net; Millie Munshi at
mmunshi@bloomberg.net Stephen Farr
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