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Aligning our capital structure with the realities of today’s markets and economy – Genmar’s Plan
General Maritime Corporation announced today that it has reached agreements with its key senior lenders , including its bank group, led by Nordea Bank Finland plc, as well as affiliates of Oaktree Capital Management, L.P., on the terms of a financial restructuring that will strengthen the Company’s balance sheet and enhance its financial flexibility.
Under the terms of the restructuring agreement, Oaktree will provide a $175 million of new equity, of which $75 million would be used to pay down the senior secured facilities, and convert its pre-petition secured debt to equity. The Senior Lenders’ would agree to amend their credit facilities to provide an amortization “holiday” until June 2014, deferring cash payments of approximately $140 million for approximately two and a half years.
Straightforward Solution – The Banks Express Confidence in Genmar
On Wednesday, General Maritime Corporation announced that it had amended its $550 million revolving credit facility and its $372 million senior secured credit facility, each led by Nordea and DnB NOR as well as its $200 million facility with Oaktree Capital to reduce the minimum cash covenant. Under the agreed terms, the minimum cash and cash equivalent balance and revolver availability is reduced from $50 million to $35 million through December 31, 2011, which amount steps up to $40 million through March 31, 2012. Subsequent to the latter date, the original terms apply. In the case of the Oaktree facility only a 10% cushion in Genmar’s favor applies.
Just Being Cautious – Genmar ATM
Last week, General Maritime Corporation entered into Open Market Sales Agreements with Jefferies & Company, Inc. and Dahlman Rose & Company LLC, to facilitate the sale of up to $50 million of its shares in the aggregate through “at-the-market offerings”. As is the case in transactions of this type, sales may be made through ordinary brokers’ transactions at market prices prevailing at the time of sale, at prices related to the prevailing market prices, or at negotiated prices. In addition, Genmar may also sell its shares to either Jefferies or Dahlman Rose, its sales agents, at a price agreed at the time. Commissions on the sale of securities are payable at the rate of 2.5% of the gross sales price of the shares sold in which such Sales Agent is a party, and are reduced to 2% in those instances where shares are sold to parties named in the sales agreement.
Cool, Steady Heads Prevail – Genmar Restructures Liabilities
Banking on its relationship with its long-time investor, Oaktree Capital, General Maritime Corporation successfully raised $200 million in new capital, which formed the cornerstone of a restructuring of its balance sheet designed to improve liquidity largely through the reduction of its near-term debt obligations. The important side effect of the transaction was a reduction of the cash flow breakeven rate to a level commensurate with today’s weak tanker market.
Peter G was here before in the late 1990s, another weak market, but this time it was much tougher due to the large commitments resulting from the acquisition of the Metrostar fleet. As one can see from the result, this was without a doubt one difficult negotiation and we can only imagine, given Peter G’s penchant for cigars, long hours in a dark smoke-filled room. But, of course, we would have to imagine it since City ordinances prohibit smoking and Peter G gave up cigars quite a while ago. But why let facts get in the way of a good image.
Managing Liabilities
While the world looks for a long-term contracted revenue stream, in these difficult times, it also behooves companies to carefully manage their liabilities, as another means of managing their cash flow.
Shipping Industry Primary Equity Offerings in the U.S. Public Market in the First Half of 2010
By Hannah Arntzen
There is hope for the shipping market yet! According to a recent survey undertaken by Francois Janson and Frode Jensen of Holland & Knight LLP, in the first six months of 2010 there have been fourteen primary equity offerings in the U.S. Public market made by thirteen different issuers, Nordic American Tanker Shipping Ltd., Teekay Tankers Ltd., Overseas Shipholding Group Inc., General Maritime Corporation, Seanergy Maritime Corporation, Capital Products Partners L.P., Navios Maritime Partners L.P., Safe Bulkers Inc., Tsakos Energy Navigation Ltd., DryShips Inc., Baltic Trading Ltd., Crude Carriers Corporation, and Scorpio Tankers Inc. Three of those fourteen offerings were IPO’s, the remaining eleven offerings were follow-ons. Of those eleven follow-ons, nine were firm-commitment underwritings and one was an at-the-market offering. Ten of the issuers were foreign and organized outside the United States, two issuers were foreign but had headquarters in the U.S. and only one issuer was a U.S corporation with headquarters in New York City. Ten of the thirteen issuers were organized in the Republic of the Marshall Islands, one in the United States, and the remaining two in Bermuda.
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GMR and ATB Become One
On Tuesday, the shareholders of both General Maritime Corporation (“Genmar”) and Arlington Tankers Ltd. (“Arlington”) approved the proposed combination of the companies with an ample majority. At the Genmar meeting, 21.9 million votes were cast in favor of the combination with 0.1 million against. The shares voting for adoption of the combination represented 99.25% of the shares voted at the meeting and approximately 69.97% of the shares outstanding. In the case of Arlington, 9.8 million shares were voted for the merger with 1.2 million voting against. In this instance the shares voted in favor represented approximately 89% of the shares voted at the meeting and 63.6% of the shares outstanding.
The new Genmar is now well-positioned with its diverse double hull fleet to provide quality service to its charterers as well as create near-term value for its shareholders through the $2 dividend target which is supported by the fleet’s contracted revenue stream.
We congratulate the parties on a well-structured transaction, which, being based upon an exchange of shares, was successfully concluded in these most turbulent of times.
Hard Numbers
Moving from the theoretical to the concrete, the following examples illustrate the real cost of today’s crises:
Genco Bites the Bullet
On Tuesday, Genco Shipping & Trading (“Genco”) made the correct but painful decision to cancel the previously announced acquisition of six dry bulk newbuildings, including three Capesize and three handysize vessels, from Lambert Navigation et.al., at an aggregate purchase price of $530 million. As part of the agreement, the sellers will retain the deposits totaling $53 million. The three Capesize vessels and three Handysize vessels are being constructed in the Daehan and Jinse shipyards in South Korea, with deliveries commencing in the 4th quarter 2008 (two Handysize) through 2009.
Morgan Stanley Upgrades Tanker Sector
The Official Guide To Marine Finance Providers
Shipping Index
