UPDATE 3-Tanker downturn sends General Maritime to bankruptcy

Thu Nov 17, 2011 12:41pm EST

* Oaktree Capital to pump in $175 mln in equity

* Receives up to $100 mln DIP financing commitment

* Debtors expect emergence from bankruptcy in spring of 2012

By Vaishnavi Bala and Krishna N Das

Nov 17 (Reuters) - General Maritime Corp, a crude oil and refined petroleum products shipper, filed for Chapter 11 bankruptcy protection on Thursday, becoming the latest victim of a downturn triggered by an oversupply of vessels amid weak demand.

Bankers expect more bankruptcies and restructuring in the sector as daily rates for vessels fall below their operating costs, hurting companies' cash flows and ability to comply with loan agreements.

General Maritime, which listed total assets of $1.72 billion and liabilities of $1.41 billion as of September end, said private equity firm Oaktree Capital Management will provide it with $175 million in equity.

The company's lenders have also agreed to defer cash payments of about $140 million to June 2014.

"(Oaktree investment) is good in this situation as tanker markets will stay soft for at least 2-3 years," First Securities ASA analyst Erik Folkeson said.

"However, they will still have a negative operating cash flow. The question is, when will the markets turn and will they have sufficient cash to live through a long period of tough market?"

The company has a commitment for up to $100 million in new debtor-in-possession financing from a group of lenders, led by Nordea as the administrative agent. The debtors are expecting the company to emerge from bankruptcy in the spring of 2012.

"The situation (bankruptcy/current agreement) is the best for all partners," Nordea spokesman Erik Durhan said. "We don't expect there to be any large negative effect on Nordea."

LOSSES

New York-based General Maritime, whose shares have lost about 95 percent of their value this year as of Wednesday, has posted losses for the last eight quarters.

The company, which was founded in 1991 by chairmen Peter Georgiopoulos in its first avatar as Maritime Equity Management, owns a fleet of 30 tankers with a total carrying capacity of about 5.1 million deadweight tonnage.

It operates mainly in the Atlantic Ocean, including ports in the Caribbean, South and Central America, the United States, West Africa, the Mediterranean, Europe and the North Sea.

General Maritime said all its units, except those in Portugal, Russia, Singapore and certain inactive ones, have also started Chapter 11 cases.

"If the market stays at this level for a long time, many companies will go the same way. They will have a need to deleverage and increase their liquidity," analyst Folkeson said.

"We will see a lot of restructuring."

Danish firm Torm, which has a dry shipping and oil tanker division, said on Thursday it was talking to lenders about rescheduling its $1.84 billion debt and tripled to $300 million the amount it is seeking in a rights issue.

On Wednesday, trucking and marine freight service provider Trailer Bridge Inc filed for Chapter 11 bankruptcy protection and drybulk shipper Paragon Shipping Inc said it was in violation of a loan agreement.

The case is in Re: General Maritime Corp-Southern District of New York, No. 11-15285.

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