GNK

Business Context and Reporting Period

Company: Genco Shipping & Trading Limited
Filing Type: Form 8-K (Current Report)
Date of Report: June 5, 2018
Event Date: May 31, 2018
Context: The Company entered into a new five-year senior secured credit facility to refinance existing debt and pay down debt on seven older vessels identified for sale. Additionally, the Board amended the Company's By-Laws to permit action by written consent.

Key Financial Metrics and Debt Structure

New Credit Facility Terms:

• Aggregate Principal Amount: Up to $460,000,000.
• Maturity Date: May 31, 2023.
• Interest Rate: LIBOR plus 325 basis points through December 31, 2018; thereafter LIBOR plus 300 to 350 basis points based on leverage ratios.
• Amortization: $15,000,000 per quarter commencing December 31, 2018, with a final balloon payment of $190,000,000.
• Collateral: Current fleet vessels (excluding seven oldest vessels), earnings, insurance, and time charters exceeding 24 months.

Financial Covenants:

• Minimum Liquidity: Unrestricted cash must equal or exceed the greater of $30 million or 7.5% of total indebtedness.
• Debt to Capitalization: Not to exceed 70%.
• Collateral Maintenance: Aggregate appraised value of collateral vessels must be at least 135% of the outstanding loan principal.
• Working Capital: Consolidated current assets (excluding restricted cash) minus current liabilities (excluding current portion of long-term debt) must be not less than zero.

Estimated Q2 2018 Daily Expenses (60 Vessels):

Material Changes and Unusual Items

Debt Refinancing and Extinguishment:

• Proceeds of $460,000,000 were used to refinance all existing credit facilities into one facility.
• Debt on seven oldest vessels (identified for sale) was paid down.
• Loss on Debt Extinguishment: The Company anticipates recording a loss of approximately $4.5 million for the quarter ended June 30, 2018.
• Transaction Costs: Legal fees of approximately $1.0 million are estimated to be reflected in general and administrative expenses for the quarter.

Dividend Policy: Dividends may be paid after December 31, 2018, subject to customary conditions and a limitation of 50% of consolidated net income for the preceding quarter if the collateral maintenance test ratio is 200% or less.

Guidance, Outlook, and Risks

Management Commentary: The new facility supports the Company's fleet renewal program by allowing the sale of collateral vessels without immediate loan prepayment, provided replacement vessels meeting specific value requirements are added within 120 days.

Risks and Contingencies:

• Market Conditions: Declines in drybulk shipping demand or rates, and changes in supply/demand for drybulk products.
• Operational Costs: Increases in crew wages, insurance, bunkers, and maintenance costs.
• Regulatory and Political: Changes in international regulations, political conditions, acts of war, or piracy.
• Financial Estimates: The daily expense figures and loss on debt extinguishment are preliminary estimates and subject to change based on actual results.

Investor Verification Checklist

• Verify the final recorded amount of the loss on debt extinguishment (estimated at $4.5 million) in the Q2 2018 Form 10-Q.
• Confirm the actual legal and transaction fees incurred (estimated at $1.0 million) in Q2 2018 general and administrative expenses.
• Monitor compliance with the new collateral maintenance test (135% coverage ratio) as the Company executes its fleet renewal program.
• Review the status of the seven oldest vessels identified for sale and the timeline for acquiring replacement collateral.
• Assess the impact of the new interest rate margin (LIBOR + 325 bps initially) on future interest expense compared to prior facilities.