Genco Shipping & Trading Ltd. hired Blackstone Advisory Partners LP to explore a debt restructuring after the operator of dry-bulk cargo ships missed a $3.1 million interest payment yesterday on its convertible bond.
Lenders agreed to waive default for the New York-based freight transporter, according to a filing today with the U.S. Securities and Exchange Commission. The company’s $125 million of 5 percent convertible notes due Aug. 15, 2015, fell by as much as 11.3 cents on the dollar to 45.5 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Those securities traded at 54.3 cents at 10:58 a.m. in New York.
Genco reported a loss of $174 million for the 12 months ended Sept. 30 amid a shipping crisis as an oversupply of vessels and slow global demand for seaborne commodities depressed freight rates and vessel values. Those have started to rebound from the lows, with the ClarkSea Index, a measure of industry-wide earnings, rising 41 percent in the past year to $10,767 a day. The 2012 average of $9,586 was the lowest since at least 1990.
“As a result of the continued weakness in charter rates and required payment of debt obligations” and expenditures, Genco is using a 30-day period to review financing options and ways to reorganize its capital structure, according to the filing.
The failure to pay doesn’t constitute a so-called event of default under its financing agreements until the end of the 30-day grace period. The company prepaid about $1.9 million of a $100 million term loan as part of the waiver agreement, which expires as soon as March 21, according to the filing signed by John Wobensmith, chief financial officer at Genco and its unit Baltic Trading Ltd.
“Genco is taking steps to strengthen its financial position,” Wobensmith said in an e-mailed statement. “With the assistance of the company’s outside advisors, we are engaged in what we believe to be constructive discussions with representatives of our lenders and noteholders to enhance the company’s financial flexibility. The company has liquidity to continue normal operations.”
Genco won’t report its 2013 results because of the restructuring discussions, which may result in amending or refinancing existing debt, swapping for equity, issuing more debt or equity, sales of vessels or businesses or filing for chapter 11 bankruptcy, according to the filing.
DNB ASA, Norway’s largest bank, sold loans it had made to Genco to undisclosed buyers, according to spokesman Thomas Midteide. He didn’t disclose the price.