(Updates with bond price in 11th paragraph.)
Dec. 15 (Bloomberg) -- General Maritime Corp., the second- largest U.S. owner of oil tankers, won approval of financing agreements with Oaktree Capital Management LP after changing terms to address creditors’ objections.
U.S. Bankruptcy Judge Martin Glenn in Manhattan today approved a $75 million loan from lenders including Nordea Bank Finland Plc and a $175 million equity investment from Oaktree. Glenn questioned expense reimbursements and a breakup fee for Oaktree, a junior secured lender to General Maritime that will be the lead, or stalking-horse, bidder at an auction to sell the company.
“This has all the hallmarks of a loan-to-own structure,” Glenn said. “Even if the committee is satisfied, I’m not necessarily satisfied.”
General Maritime negotiated the loan and Oaktree’s investment before filing for bankruptcy last month. Kenneth Eckstein, a lawyer for General Maritime, told Glenn today that under an agreement with creditors, some loan terms were changed and the New York-based company now has until Jan. 18 instead of Jan. 4 to file a reorganization plan.
The official creditors’ committee will get $125,000 to investigate actions before the bankruptcy, more than the $75,000 previously allotted, and will hire Lowenstein Sandler PC to handle the probe.
General Maritime still plans to auction itself to the highest bidder and still has a baseline bid from Oaktree, Eckstein said. The breakup fee for Oaktree if a higher bidder wins was reduced to $7.75 million from $12.5 million.
Some issues connected with the loan still need to be worked out, such as a provision that gives Oaktree all the equity in the reorganized company, Eckstein told Glenn. General Maritime on Nov. 18 won court permission to draw $30 million of the loan.
“We’re still resolving a dispute over equity, and how unsecured creditors will be treated,” Eckstein said.
The creditors’ committee initially argued against the loan, saying it would give Oaktree all the equity in a reorganized company while blocking creditors from suing the Los-Angeles based investment manager over transactions it made with General Maritime before the bankruptcy filing.
Under the restructuring support agreement reached before the bankruptcy filing, all of General Maritime’s debt would be converted into stock in a newly created company, and lenders would agree to vote in favor of a reorganization plan under certain terms. Supporting lenders include parties involved in a $550 million loan made in May of this year and a $372 million loan made in May 2010, according to court papers.
General Maritime’s $300 million in 12 percent notes due in 2017 traded at less than 2 cents on the dollar today, a 66 percent decline from 6 cents on Dec. 8, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The notes traded at about 10 cents when the company filed for bankruptcy on Nov. 17.
General Maritime, which operates in more than 230 ports of call in over 70 countries, filed for bankruptcy in November. It listed assets of $1.71 billion and debt of $1.41 billion in a Chapter 11 petition.
The case is In re General Maritime Corp., 11-15285, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
--Editors: Stephen Farr, Andrew Dunn
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