Cash strapped General Maritime Corp (GenMar) filed for relief under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Court for the Southern District of New York on 17th November.
Most of the company's subsidiaries – with the exception of those in Portugal, Russia and Singapore, as well as certain inactive subsidiaries– have also commenced Chapter 11 cases.
GenMar announced that it had reached agreements with its key senior lenders, including its bank group, led by Nordea Bank Finland, New York Branch as administrative agent, as well as affiliates of Oaktree Capital Management, on the terms of a financial restructuring to strengthen the company's balance sheet and enhance its financial flexibility.
The restructuring agreement and related equity commitment letter have the support of over two thirds of the company's obligations from its banks and Oaktree, GenMar claimed.
Among other things, under terms of the agreements, Oaktree will provide a $175 mill new equity investment in GenMar and convert its prepetition secured debt to equity. Under the terms of the agreement, GenMar expected to substantially reduce its funded indebtedness and enhance its liquidity profile. Operations were expected to continue without interruption, the company stressed.
In conjunction with the Chapter 11 filing, GenMar received a commitment for up to $100 mill in new debtor-in-possession (DIP) financing from a group of lenders led by Nordea.
The initial amount of the DIP is $75 mill, however, the credit facility contemplates that, if needed, the company will have access to another $25 mill of future financing, subject to the applicable lenders' agreement, certain other conditions and further order of the Bankruptcy Court.
Upon approval by the Bankruptcy Court, the new financing, combined with cash generated from the company's ongoing operations, will provide substantial liquidity, be used to support the business during the restructuring process and prevent customer interruption.
GenMar pointed out that it anticipated that it will continue to meet its obligations going forward to its customers, vendors and employees.
CFO Jeffrey Pribor, said, "We are very pleased to have reached these agreements with certain of our key senior lenders, which we believe underscore their confidence in our business and represents an important step forward for our company and provides for a commitment of liquidity.
“Our operations are strong, but continued macroeconomic weakness and reduced tanker rates have diminished our cash flow and our ability to comply with certain covenants under our debt instruments. We are taking appropriate steps to align our capital structure, which was put in place under a different economic climate, with the realities of today's markets and economy.
“Having reviewed the options available, we determined that implementing these agreements with our key lenders through court-supervised proceedings will facilitate our financial restructuring and that this is the best course of action for General Maritime. This restructuring process will allow us to continue to support our customers, suppliers and employees while we work to enhance the company's position as a leading provider of international seaborne oil transportation services.
"We look forward to working together with our creditors to complete a successful financial restructuring. General Maritime owns and operates one of the world's largest and most diverse fleets of tankers and we remain committed to safely and efficiently serving our customers. We appreciate the ongoing dedication of our employees, whose hard work is critical to our success and the future of our company. We also thank our customers, suppliers, lenders and business partners for their support as we work to position General Maritime for profitable growth," concluded Pribor.
The restructuring agreement contemplates the negotiation of definitive documents by December 2011 and provides that the transaction be implemented pursuant to a Chapter 11 plan for GenMar that must become effective by April 2012.
Each party has agreed that the company may continue to seek alternative equity commitment proposals pursuant to the restructuring agreement in accordance with its fiduciary duties. As such, the company may continue to solicit, respond to, and negotiate the submission of alternative equity commitment proposals as part of its Chapter 11 case.
The terms of the restructuring are subject to definitive documentation and approval by the Bankruptcy Court, among other conditions. Accordingly, no assurance can be given that the transactions described herein will be effected, the company warned.