A group of General Maritime Corp. noteholders opposed a request by the second-largest U.S. owner of oil tankers to borrow $75 million in bankruptcy.
General Maritime is scheduled to seek permission from U.S. Bankruptcy Judge Martin Glenn in Manhattan court today to draw $30 million of a $75 million loan to fund operations while it reorganizes. The company, which operates in over 230 ports of call in over 70 countries, filed for bankruptcy protection yesterday after falling oil demand and a surplus of ships led to two years of losses.
The terms of the loan will “serve to prematurely limit or foreclose the rights of unsecured creditors or any official committee appointed to represent their interests,” the noteholder group said in court papers filed today.
The ad-hoc group, which doesn’t have formal standing in the case, owns over $185 million in 12 percent senior notes due 2017. It includes Capital Research and Management Company, J.P. Morgan Investment Management, Inc., J.P. Morgan Securities LLC, Stone Harbor Investment Partners LP and Third Avenue Focused Credit Fund.
General Maritime’s proposed loan is from Nordea Bank Finland Plc and other lenders. The company also has a plan to restructure with certain lenders; negotiations leading up to its bankruptcy led to a “restructuring support agreement” under which lender Oaktree Capital Management LP agreed to make a $175 million equity investment.
The agreement will convert all of the company’s debt into stock in a newly created company, and lenders would agree to vote in support of a plan of reorganization under certain terms, according to court papers.
The noteholder group said that junior secured lenders to a $200 million loan, which includes an affiliate of Oaktree, shouldn’t benefit from protections given to Nordea Bank and other lenders to the $75 million “debtor-in-possession” financing. Such loans allow companies to keep operating in bankruptcy and give them a higher priority to be repaid.
They also said a $75,000 reserve set aside to fund investigations into any claims the estate might have is too low.
Freight rates for oil carriers have fallen to the lowest in at least 14 years, prompting General Maritime to warn in a Sept. 30 regulatory filing that it might file bankruptcy.
Single-voyage rates for very large crude carriers, hauling about 20 percent of the world’s oil, averaged $7,627 a day this year, compared with $32,006 in 2010, according to the London-based Baltic Exchange, which publishes costs along more than 50 maritime routes.
General Maritime has been restructuring its balance sheet since at least March, when it took out a $200 million loan from Oaktree Capital Management to refinance 2005 debt and amend 2010 debt, according to the most recent annual report, filed in March.
Among the largest unsecured creditors listed in court papers were Bank of New York Mellon Corp., trustee for holders of $300 million in 12 percent callable bonds due in 2017.
The New York-based company listed assets of $1.71 billion and debt of $1.41 billion today in a Chapter 11 petition in U.S. Bankruptcy Court in Manhattan.
The case is In re General Maritime Corp., 11-15285, U.S. Bankruptcy Court, Southern District of New York (Manhattan).