general maritime genmar

General Maritime and Oaktree Get Blasted by Their Creditors in Bankruptcy Court

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February 23, 2012

general maritime GenmarCreditors of General Maritime Corp. (GMRRQ) are accusing the oil tanker operator and “old friend” Oaktree Capital Management LLC of contriving to give the hedge fund manager ownership of the company and leave them holding the bag.

The creditors committee in General Maritime’s bankruptcy case blasted the company’s restructuring plan backed by Oaktree’s $175 million equity investment. The committee, in bankruptcy court papers, cited Oaktree’s “longstanding ties” to shipping magnate and General Maritime Chairman Peter Georgiopoulos in claiming the plan wasn’t proposed in good faith.

“Approximately three months ago, the debtors appeared before this court arm in arm with their old friend, Oaktree Capital Management, … toting a fully baked plan of reorganization that would deliver all of the equity and upside in these cases to Oaktree at the expense of the debtors’ unsecured creditors,” lawyers for the committee said Tuesday in a filing in U.S. Bankruptcy Court in Manhattan.

The committee claims General Maritime “contrived” with Oaktree to value the company at a “friendly” price while releasing company insiders and Oaktree from any liability connected to lawsuits the creditors might pursue.

One such suit the creditors say they are investigating is a bid to equitably subordinate Oaktree’s claim related to a $200 million loan it made to the company in the months before the bankruptcy filing. Although such a suit hasn’t yet been filed, if successful, it would bump Oaktree’s claims below those of lower-ranking general unsecured creditors.

The creditors also took aim at what they say is Oaktree’s long history with General Maritime and Georgiopoulos, a former investment banker at Drexel Burnham Lambert who is married to onetime fashion model Kara Young.

“In light of the debtors’ contrived valuation and the proposed releases, the debtors have not fulfilled their fiduciary duties to their unsecured creditors to maximize value in these cases,” the committee said. “The plan has not been proposed in good faith, and thus is unconfirmable.”

A spokesman for General Maritime declined to comment.

Debt-laden General Maritime filed for bankruptcy last fall with a restructuring proposal that calls for the $175 million equity infusion from affiliates of Oaktree I, in addition to a debt-for-equity swap with the hedge fund.

Under the terms of General Maritime’s deal with Oaktree, the company is allowed to pursue better deals with rival investors who may offer superior terms than Oaktree. However, the creditors said they don’t believe Oaktree has made any meaningful attempts to pursue an alternative to the Oaktree deal.

General Maritime said, according to court papers, that no one was willing to invest in the company at a level that paid Oaktree’s claim in full.

The company’s 33-vessel fleet travels to about 230 ports of call in more than 70 countries. Its ships transport crude oil and refined petroleum products for such customers as BP PLC (BP, BP.LN), Chevron Corp. (CVX), and Exxon Mobil Corp. (XOM).

General Maritime blamed its financial woes on poorly timed expansion. In 2010 the company struck deals to buy seven tanker ships for $620 million, hoping the move would boost its revenue enough to justify the expense. By the time the company had taken ownership of the vessels, the shipping industry’s nascent recovery was starting to wane. Charter rates for tankers plummeted and Global Maritime’s bottom line took a hit.

-By Patrick Fitzgerald, Dow Jones Daily Bankruptcy Review

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