The judge overseeing the bankruptcy of General Maritime Corp. (GMRRQ:US) said he will approve its reorganization plan, giving Oaktree Capital Management LP most of the shipping company’s new stock after it reached a last-minute agreement to sell one of its vessels.
U.S. Bankruptcy Judge Martin Glenn in New York today approved an amended version of the Chapter 11 plan for the second-largest U.S. owner of oil tankers, subject to final modifications.
“The plan is fair and equitable,” Glenn said, noting that it restructures more than $1.3 billion in pre-bankruptcy debt. The plan’s terms will cancel all of General Maritime’s old stock, giving nothing to holders of 121.7 million common shares. Secured debt will be repaid in full and converted to equity in the reorganized company, giving 98 percent of stock in a new firm to Los Angeles-based Oaktree.
General Maritime, which operates in more than 230 ports in more than 70 countries, filed for bankruptcy in November. The company listed assets of $1.71 billion and debt of $1.41 billion in its Chapter 11 petition. In February, when Glenn approved a draft of the plan, he told creditors to either prepare evidence for a fight over the final plan or negotiate an agreement.
An amended version of the plan resolved objections from most unsecured creditors, improving their estimated recovery from as much as 1.88 percent to a maximum of 5.41 percent. The majority of creditors voted in favor of the plan and Glenn overruled the three objections that remained at the opening of today’s hearing.
Douglas Mannal, a lawyer for General Maritime, told the judge that in order to meet the terms of its bankruptcy operating loan, the New York-based operator of more than 30 oil tankers made a last-minute decision to sell one of its ships, the Alexandra, for an estimated $6 million to $8 million. The firm reached an accord with all creditors on the sale, he said.
“The money will go to pay down the debtor-in-possession loan and give greater liquidity to the company on emergence,” Mannal said.
The revised plan will cut the company’s debt by $600 million and involve two new credit facilities totaling $783 million, Mannal said.
Unsecured creditors had initially objected to the plan’s terms, which they said will grant a legal shield to the directors and officers of the company and Oaktree, a pre- bankruptcy lender which is also a sponsor of the reorganization.
Unsecured creditors also initially objected that Oaktree had a deal with the company “locked up” and that the reorganization proposal wasn’t made in “good faith,” citing a long relationship between Oaktree and General Maritime Chairman Peter Georgiopoulos. Oaktree has had dealings with General Maritime since 1999, when it provided the company with a $15 million loan, creditors said in court papers.
After a probe showed that they could file lawsuits against parties to some of the company’s loans, unsecured creditors negotiated improved terms, said Pedro Jimenez, a lawyer for the committee of unsecured creditors. The new terms give them $4 million to $6 million in cash and 2 percent of the common stock in the new company, with warrants to potentially increase their share, Jimenez said.
Today’s remaining objections came from senior noteholders and equity holders, General Maritime said in court papers. Donald Marro, the holder of senior notes with a face amount of $50,000, sought to give general unsecured creditors more benefits. Shareholders objected that the plan gave them no recovery.
Marro’s objection should be overruled because 69 percent of claims like his, and 97 percent of his class by dollar amount, voted to accept the plan, General Maritime said in court papers. The company also said shareholders couldn’t get a recovery because creditors in line before them under bankruptcy law won’t be repaid in full.
General Maritime shares, which traded at 1.4 cents before today’s hearing, dropped as much as 12 percent afterward to 1.2 cents in over-the-counter trading. The company’s 12 percent notes due in 2017 traded at 2.78 cents on the dollar on April 19, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
The case is In re General Maritime Corp., 11-15285, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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