A U.S. bankruptcy judge said he will confirm Genco Shipping & Trading’s plan to exit bankruptcy under the control of its senior creditors, rejecting arguments by shareholders that the proposal undervalues the dry bulk shipper’s assets.
At a hearing on Wednesday in U.S. Bankruptcy Court in Manhattan, Judge Sean Lane said he agreed with the company’s estimate that its going concern value was less than $1.5 billion.
A committee of shareholders had argued the value could be as high as $1.91 billion, calling Genco’s restructuring a ploy to hand over control to creditors and management. Under the plan, existing shareholders would receive just $30 million in warrants.
Shares of Genco, which trade over the counter, were down about 8 percent in afternoon trade at 81 cents each. The shares had fallen as low as 68 cents.
The ruling follows a four-day trial in Lane’s courtroom that posed the question of how to value a shipping company.
Financial advisers at Blackstone, which was retained by Genco to value the company, based its estimate on the market value of its ships and other assets. Shareholders included financial performance and other factors in their higher valuation.
Since Genco’s Chapter 11 filing in April, shareholders have found themselves at odds with the company and just about all its creditors.
They were the only opponents to the restructuring, which Genco says will reduce debt by $1.2 billion while giving secured lenders 81 percent of its post-bankruptcy ownership. Convertible noteholders would get 8.4 percent of the equity and a chance to participate in a rights offering that would raise $100 million in new capital for Genco.
Far from mom-and-pop investors, the shareholders are hedge funds that routinely invest in distressed assets and litigate in hopes of boosting their recoveries. The committee appointed by the U.S. Department of Justice’s bankruptcy watchdog to vouch for the shareholders includes Aurelius Capital Management, Och-Ziff Capital Management and Mohawk Capital.
Genco, controlled by its chairman, the shipping magnate Peter Georgiopoulos, is the latest in a line of shippers to file for bankruptcy amid a glut of vessels. Nautilus Holdings Ltd last month filed for bankruptcy in White Plains, New York, while Excel Maritime Carriers, Overseas Shipholding Group and Georgiopoulos’ own General Maritime have filed in recent years.
February 19, 2015
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