Genco Shipping Files for Bankruptcy

Bloomberg News reports Genco Shipping has filed Chapter 11 Bankruptcy, which is reorganization, not liquidation.

The dry-bulk shipping market is recovering from the biggest glut in history, according to Clarkson Plc, the world’s largest shipbroker. The fleet has swelled 84 percent since 2008 while trade advanced 31 percent, according to Clarkson’s data. 

The "professionals" are saying the problem is due to the glut of ships.  While this is true, the reason for the glut of ships is because after the 2008 crash everyone thought "oh wow, ships are really cheap...let's order a bunch and soon the market will turn around".  But these people don't really know shipping, and there will be more shipping companies filing bankruptcy soon.  Especially as China had been one of the big drivers for bulk cargoes, and they are facing an economic downturn.


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General Maritime files Chapter 11

Hum, 2 days in a row announcement of a shipping company filing
Chapter 11.

Does not bode well for the industry.


From Bloomberg News

General Maritime Corp. (GMR), a transporter of crude oil via ocean tankers, filed for bankruptcy court protection from creditors amid low freight rates and a surplus of ships.

The New York-based company listed assets of $1.71 billion and debt of $1.41 billion in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Manhattan. General Maritime, which operates mostly between the Caribbean, South and Central America, the U.S., Western Africa and the North Sea, has a fleet of 31 double-hull tankers, according to its website.

“Operations are to continue without interruption” after General Maritime reached agreements with key lenders, the company said in a statement after the bankruptcy filing. “General Maritime expects to substantially reduce its funded indebtedness and enhance its liquidity profile.”

Oaktree Capital Management LP will provide a $175 million equity investment and a group led by Nordea Bank Finland Plc will provide as much as $100 million in financing to help the company through reorganization, General Maritime said.

General Maritime joins other troubled shipping companies in bankruptcy, including Korea Line Corp. (005880), Korea’s second-largest operator of dry-bulk ships which sought U.S. bankruptcy protection in February. Time-chartered operators Britannia Bulk Plc, Armada (Singapore) Pte Ltd. and Transfield ER Cape have also filed for bankruptcy.

Balance Sheets

General Maritime has been restructuring its balance sheets since at least March, when it took out a $200 million loan from Oaktree Capital Management to refinance its 2005 debt and amend its 2010 debt, according to the company’s most recent annual report, filed in March.

Chief Executive Officer John Tavlarios said in July that the company had made transactions to increase its liquidity, as it announced a loss of $36.8 million for the quarter ended June 30, more than double the $14 million lost in the same period a year earlier.

Among the largest unsecured creditors listed in court papers were Bank of New York Mellon Corp. (BK), trustee for holders of $300 million in 12 percent callable bonds due in 2017.
Stock Fell

In August, the company led declines in oil-tanker stocks as analysts predicted a return to recession in the U.S. would delay any rebound in charter rates for tankers until after 2013. On Aug. 22, the company said it had received a delisting notice as its share price failed to meet the New York Stock Exchange’s minimum requirements.

The shares closed yesterday at 16 cents.

Moody’s Investors Service cut its credit grade on the company’s debt to Caa3 in September, citing the increasing likelihood of a restructuring because of “weak sector fundamentals.” The company’s “overreliance” on its cash balance, which was almost $59 million as of June 30, may cause it to fall out of compliance with a minimum liquidity covenant, Moody’s analysts said in the Sept. 1 note.

The company is likely to “have a difficult time achieving positive operating cash flow, which could threaten its ability to make cash interest payments,” the Moody’s analysts wrote. Weak freight rates will also pressure the market value of tanker vessels, cutting another source of liquidity, they wrote.

The company’s bonds steepened their decline in October after the company announced it had agreed to amend its $500 million revolving loan, its $372 million term loan, and its $200 million loan with affiliates of Oaktree. The changes waived General Maritime’s need to maintain a minimum cash balance.

The case is In re General Maritime Corp., 11-15285, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

Trailer Bridge files for Chapter 11 Bankruptcy

Chapter 11 bankruptcy in the U.S. allows a company to continue operating,
and offers protection from creditors.

Trailer Bridge announced they will continue to operate under Chapter 11

From The Journal of Commerce

Carrier maintains operations, gains DIP financing under Chapter 11

U.S.-Puerto Rico carrier Trailer Bridge filed for Chapter 11 bankruptcy reorganization on Wednesday, a day after failing to refinance $82.5 million in bond debt that became due Tuesday.

The company said it will continue operation and has an agreement for $15 million in debtor-in-possession financing. The financing, worked out with Global Hunter Securities, is subject to approval of the U.S. bankruptcy court in Jacksonville, Fla., where Trailer Bridge is headquartered.

Trailer Bridge told the Securities and Exchange Commission late Tuesday the company expected to file its quarterly report by Nov. 21, a week behind schedule. The company said it needed extra time because the company has been focused on its bond refinancing efforts.

The company said it views the Chapter 11 filing as “the quickest and most efficient way to restructure its balance sheet and ensure the long-term strength of its operations.” Trailer Bridge said it hopes to complete the reorganization by the end of the first quarter of 2012.

The bankruptcy reorganization, “if successfully implemented, will result in a revitalized company with a vastly improved and deleveraged balance sheet, “Co-CEOs William G. Gotimer Jr. and Mark A. Tanner said in a statement

Wells Fargo Bank last month granted any an extension to Nov. 14 on Trailer Bridge’s 9.25 percent senior secured bonds due Nov. 15.

In the carrier’s second quarter report Aug. 15, Trailer Bridge said it was “exploring a number or options that might involve the private or public lending market and may include an equity component, and that might result in a change of control.”

Trailer Bridge operates a container-barge service between Jacksonville, Fla., and Puerto Rico and the Dominican Republic. The company also operates motor carrier service in the 48 contiguous states.