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Genco Cleared to Exit Bankruptcy

Genco Cleared to Exit Bankruptcy

: Richard West Law Office

gencoAfter filing Chapter 11 bankruptcy in April, 2014, Genco Shipping & Trading received approval on their financial restructuring plan by a bankruptcy judge on July 3, 2014.

Reason for Bankruptcy

At the advice of bankruptcy lawyers and other financial experts, the cargo ship company chose to file bankruptcy as weak charter rates made it nearly impossible for Genco to pay numerous creditors.

The Conflict

For the past few months, shareholders have been in opposition to the company’s efforts to institute a financial restructuring plan that will cut Genco’s debt by $1.2 billion, divide the company’s equity between senior editors, and give their shareholders $30 million in warrants. In the opinion of the shareholders, this deal did not properly appreciate the true value of the company and its shareholders. This is what led to the four-day trial in the U.S. Bankruptcy Court in Manhattan.

The Ruling

Ultimately, Judge Sean Lane ruled that the company’s estimated value was closer to $1.5 billion versus that $1.91 billion that the shareholders were arguing.

The gap in these estimates came from the difference between how Blackstone, Genco’s financial advisers, and the shareholders chose to calculate the value of the company. Blackstone’s projections were based on the market value of ships in addition to other assets. On the other side, the shareholders decided to also include financial performance, among a few additional elements.

Moving Forward

The restructuring that was approved will decrease Genco’s debt by $1.2 billion in addition to providing secured lenders with 81% of post-bankruptcy ownership. The financial restructuring gives Genco the opportunity to raise $100 million in new capital.