Wednesday, February 19, 2014

Genco Misses Interest Payment Due On 5.00% Convertible Senior Notes due August 15, 2015 $GNK

Press release:

The Company reported today that, as of December 31, 2013, the Company’s cash balance was approximately $74.7 million, excluding Baltic Trading’s cash.

Item 8.01 Other Events.

The Company did not make the scheduled semi-annual interest payment of approximately $3.1 million (the “Interest Payment”) due on February 18, 2014 (the “Payment Date”) under the Notes. However, under the terms of the Indenture, a failure to pay interest on the Payment Date does not constitute an Event of Default (as defined in the Indenture) unless such failure continues for a period of 30 days (the “Grace Period”).

Despite the Grace Period under the Indenture, the failure to make the Interest Payment on the Payment Date may constitute a default under the $100 Million Term Loan Facility. Under the Waiver Agreement, the lenders under the $100 Million Term Loan Facility have agreed to waive, for a certain period of time and subject to certain conditions, the occurrence of an Event of Default thereunder as a result of the Company’s failure to make the Interest Payment on the Payment Date (and without regard to the Grace Period). Such waiver expires upon the earliest of March 21, 2014, the occurrence of any Event of Default under the $100 Million Term Loan Facility other than the Event of Default being waived, and the failure of the Company or any of its subsidiaries who is a guarantor under such facility to observe any of its covenants or agreements under the Waiver Agreement. In fulfillment of a condition to the waiver, the Company prepaid approximately $1.9 million of the principal amount under the facility that was due on March 31, 2014.

As a result of the continued weakness in charter rates and required payment of debt obligations of, and expenditures by, the Company, the Company is using the Grace Period to review its financing options and is currently considering various alternatives with respect to the restructuring of its capital structure. In this connection, the Company is in discussions with representatives of its secured lenders and certain holders of the Notes concerning a potential restructuring of its indebtedness. The Company has retained Blackstone Advisory Partners L.P. as its financial advisor with respect to such potential restructuring. The Company does not intend to provide updates or details of the restructuring discussions on an ongoing basis. Given the ongoing restructuring discussions, the Company has not yet scheduled the release of its financial results for the year ended December 31, 2013. Potential modifications to the Company’s capital structure include seeking additional liquidity through amendments or refinancings of existing indebtedness or waivers or extensions of obligations thereunder, conversion or exchange of debt into equity, additional offerings of debt or equity, vessel sales, the sale of all or a portion of the Company’s business, and/or commencing a voluntary proceeding to reorganize under Chapter 11 of the Bankruptcy Code.

Any such restructuring is not anticipated to affect the Company’s subsidiary, Baltic Trading Limited, which operates as a separate business under the leadership of its own board of directors and with its own financing commitments and relationships.

The Company continues to monitor working capital availability and capital resources, and its ability to maintain working capital and capital resources will have a material impact on the ultimate resolution of the Company’s current liquidity situation, its ability to meet its debt obligations and the timing of any potential actions in response to the situation. There can be no assurance that the Company will be able to successfully resolve its current liquidity situation, that the Company will receive any additional funding from any party, or that the Company will be able to reach agreement with its various secured lenders and other creditors on a consensual restructuring of its capital structure. If procured, modified or additional financing may subject the Company’s current shareholders to substantial additional dilution of their ownership interests in the Company. Investors are cautioned that they could lose some or all of their investment in the event of a restructuring of the Company, including with respect to a voluntary proceeding to reorganize under Chapter 11 of the U.S. Bankruptcy Code. In addition, although the Company would seek to mitigate the adverse impact of a voluntary proceeding under Chapter 11 of the U.S. Bankruptcy Code on the Company’s relationships with customers or vendors, there can be no assurance that any such proceeding would not have such an impact.


jHurt said...

sold a bunch of january 2015 calls a week ago when i came across your article. where am i taking you to dinner? :)

jHurt said...

really need a debtwire subscription. lots of $ to be made on these types of plays (distressed companies with publicly traded equities).

CP said...

Ha! Whereabouts are you located?

Anonymous said...

So we should hear something by March 20th from the company and creditors? That's when the grace period expires.

CP said...

Yes, in these payment blocking situations you expect the Ch 11 to be filed by the end of the unsecureds' grace period.

Anonymous said...

Will this be a chapter 11 filing or could it still be a huge debt for equity swap?

CP said...

We can be pretty sure that it will be Chapter 11, because an exchange offer would take time to implement. It would have been announced before the notes interest payment was do, for example.

Anonymous said...

Large open interest in the April 1 puts.

Does the equity get wiped out or could this be another OSGIQ where there is still value leftover?