General Maritime Files Chapter 11, Declares $1.4 Billion in Debt

By MarEx 2011-11-17 12:09:53

The U.S.’s second largest oil tanker owner files for bankruptcy protection in Manhattan.

The company said in a statement Thursday that the bankruptcy comes after a surplus of ships and a decreasing oil demand led to two years of losses. The New York based company reported $1.71 billion in assets and $1.41 billion in debt in a Chapter 11 petition filed in U.S. Bankruptcy Court in Manhattan.

General Maritime is receiving a $175 million equity investment from Oaktree Capital Management and up to an additional $100 million in financing from Nordea Bank Finland Plc to help the company reorganize.

In Thursday’s statement the company said “operations are expected to continue without interruption.” The company also noted that “all….subsidiaries, except those in Portugal, Russia and Singapore as well as certain inactive subsidiaries- have also commenced Chapter 11 cases.”

Jeffrey D. Pribor, Chief Financial Officer, said, "We are very pleased to have reached these agreements with certain of our key senior lenders, which we believe underscore their confidence in our business and represents an important step forward for our company and provides for a commitment of liquidity.  Our operations are strong, but continued macroeconomic weakness and reduced tanker rates have diminished our cash flow and our ability to comply with certain covenants under our debt instruments.  We are taking appropriate steps to align our capital structure, which was put in place under a different economic climate, with the realities of today's markets and economy.  Having reviewed the options available, we determined that implementing these agreements with our key lenders through court-supervised proceedings will facilitate our financial restructuring and that this is the best course of action for General Maritime.  This restructuring process will allow us to continue to support our customers, suppliers and employees while we work to enhance the Company's position as a leading provider of international seaborne oil transportation services."

Under the agreements, the parties agreed to support a plan of reorganization for the Company that would include:

Oaktree's agreement to provide the reorganized Company with a new $175 million equity investment, $75 million of which would be used to pay down the Company's senior secured first lien facilities;

Oaktree's agreement to convert 100% of its senior secured debt into equity of the reorganized Company; and

The Key Senior Lenders' agreement to amend their credit facilities in order to provide the Company with relief in the form of an amortization "holiday" until June 2014, deferring cash payments of approximately $140 million for approximately two and a half years.

General Maritime expects to receive the courts approval for their requests to continue honoring claims of its critical vendors and non-U.S. vendors. In Thursday’s statement they noted that all vendors will be paid in full for goods and services provided after the filing.

They also expect to file an 8-K with the SEC that will include the agreement of support for the restructuring and the equity commitment letter.