Genco Tiberius, a Capesize bulk carrier owned by Genco Shipping. Photo (c) Lars Staal/MarineTraffic.com
By Dawn McCarty
April 21 (Bloomberg) — Peter Georgiopoulos’s Genco Shipping & Trading Ltd., an operator of dry-bulk cargo ships, filed for bankruptcy as weakness in charter rates made it difficult for the company to pay its creditors.
The shipping industry has suffered from a glut of vessels after buying too many before the 2008 global recession, driving down rates and saddling companies with debt, said Erik Nikolai Stavseth, an Oslo-based analyst at Arctic Securities ASA.
“They were all victims of the exuberance we saw in the shipping market in the mid- to late-2000s,” Stavseth said in an interview before the bankruptcy filing. “High leverage on expensive assets is what killed them.”
Genco, which owns or operates vessels that transport iron ore, coal, grain, steel and other products worldwide, listed assets of $2.4 billion and debt of $1.5 billion in a Chapter 11 filing today in U.S. Bankruptcy Court in Manhattan.
Georgiopopulos’s General Maritime Corp., which operates in more than 230 ports in more than 70 countries, filed for bankruptcy in November 2012. Its restructuring gave Oaktree Capital Management LP most of the company’s new stock.
Other ocean-transport companies have sought bankruptcy protection since the financial crisis, including Overseas Shipholding Group Inc. in 2012 and Excel Maritime Carriers Ltd., which filed last year and emerged on Feb 14.
Genco’s assets include stakes in Baltic Trading Ltd. and Jinhui Shipping & Transportation Ltd. A year ago, the debt was $300 million higher than the market value of the assets, Omar Nokta, a New York-based analyst at Global Hunter Securities LLC, said in a Feb. 24 report.
Genco, based in New York, said in an April 3 regulatory filing that it had reached an agreement with a majority of lenders that includes converting a 2007 credit line into 81.1 percent of the equity in the reorganized company.
About $1.1 billion was outstanding on that loan on Sept. 30, according to data compiled by Bloomberg. The company’s $125 million of convertible securities would be swapped for 8.4 percent of the equity, according to the April 3 filing. Current equity holders would get seven-year warrants for a 6 percent stake.
Before the filing, Genco hired Blackstone Advisory Partners LP to explore a debt restructuring. Lenders agreed to waive default after Genco missed a $3.1 million interest payment on its convertible bond, according to a filing with the U.S. Securities and Exchange Commission. Genco made the payment on March 20.
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.
Genco owns 53 dry-bulk carriers, consisting of nine Capesizes, eight Panamaxes, 17 Supramaxes, six Handymaxes and 13 Handysizes, according to its website. Capesizes are the largest, and Handysizes the smallest, by carrying capacity.
The case is In re Genco Shipping & Trading Ltd., 14- bk-11108, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Copyright 2014 Bloomberg.
–With assistance from Isaac Arnsdorf in New York.
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