Genco (GNK) Prepackaged Bankrupty May be Disrupted by Stakeholders

Genco Shipping & Trading Ltd. (NYSE: GNK) stock was volatile on Friday after the company reached a deal with lenders. Analyst Michael Webber of Wells Fargo commented on the prepackaged bankruptcy agreement and potential disruption from organized equity holders.

"Yesterday after the close, GNK announced a restructuring support agreement (RSA) with lenders, under which its $1.1B 2007 credit facility will be converted into an 81.1% equity stake in the reorganized GNK entity, while the $100MM and $253MM term loan facilities will be replaced by new/amended senior secured facilities with an August 2019 maturity and modified covenant terms. Under the terms of the RSA, GNK will fully pay its outstanding swaps, while its 5% Convertible Notes will be converted into 8.4% equity in the reorganized GNK entity. GNK will also conduct a $100MM rights offering under the reorganized GNK for an 8.7% stake of the pro forma entity, with notes holders receiving up to 20% participation in the rights offering (which will also be backstopped by supporting notes holders)," said Webber.

"The RSA cancels all equity interests in GNK with shareholders receiving 7-year warrants for a 6% interest in the reorganized GNK at a strike price corresponding to a $1.3B market capitalization, leaving limited near-to-intermediate term equity value. As part of the RSA, GNK has until 4/13 to accept the proposed agreement, and will be subject to a $26.5MM termination fee to lenders if the deal is not accepted," he added. "While we believe there's an impetus for this deal to go through, given a recent investment in the common from Strategic Value Investors, the reaction of the stock this morning (potentially implying the equity could be consolidating), and the minimal warrant value left over for current equity holders, we believe there could be some disruption to the process from organized equity holders looking for a better deal."

Wells Fargo has an Underperform rating on Genco Shipping.

For an analyst ratings summary and ratings history on Genco Shipping click here. For more ratings news on Genco Shipping click here.

Shares of Genco Shipping closed at $1.53 yesterday.

You May Also Be Interested In

• Genco Shipping takes delivery of new Capesize vessel
• Intuitive Machines Inc. (LUNR) PT Lowered to $32 at Cantor Fitzgerald, Reaffirms Overweight Rating
• BofA Securities Resumes American Eagle Outfitters (AEO) at Underperform