Oct. 3 (Bloomberg) -- General Maritime Corp.’s bonds plunged to the lowest level since at least August 2010 as the U.S. oil-tanker owner is pressured by low freight rates and a surplus of ships.
The company’s $300 million of 12 percent bonds maturing in November 2017 tumbled 6.75 cents to 30 cents on the dollar as of 8:17 a.m. in New York, with yields soaring to 48.4 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The securities, issued in November 2009, have tumbled from 96.5 cents on the dollar at the start of the year.
Moody’s Investors Service cut New York-based General Maritime’s credit grade to Caa3 last month citing the increasing likelihood of a restructuring of credit facility terms or of the debt capital structure because of “weak sector fundamentals.” The company’s “overreliance” on its cash balance, which was almost $59 million as of June 30, may cause it to fall out of compliance with a minimum liquidity covenant, Moody’s analysts said in the Sept. 1 note.
The company is likely to “have a difficult time achieving positive operating cash flow, which could threaten its ability to make cash interest payments,” the Moody’s analysts wrote. Weak freight rates will also pressure the market value of tanker vessels, cutting another source of liquidity, they wrote.
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