| NEW YORK, June 12
NEW YORK, June 12 Genco Shipping & Trading
on Thursday defended its proposed plan to exit
bankruptcy on the first day of a trial over accusations by
shareholders that it is undervaluing its assets.
At a hearing in federal bankruptcy court in Manhattan, a
lawyer for Genco, a dry bulk shipper that filed for Chapter 11
in April, said the plan protects all stakeholders, equity
"Equity wants to have their cake and eat it too," Bradley
O'Neill, the lawyer, told Judge Sean Lane.
Shareholders have panned the plan because of what they see
as a paltry payout, about $30 million in warrants. The federal
government as well has objected to the plan on unrelated
The equity holders include Aurelius Capital Management and
other sophisticated hedge funds known for buying distressed debt
and litigating to boost their payouts.
Decreased charter rates and general volatility in the
shipping market pushed Genco into bankruptcy with about $1.3
billion in debt. Under a restructuring supported by its
creditors, Genco would give secured lenders 81 percent of its
post-bankruptcy ownership. Convertible noteholders would get 8.4
percent of the equity and a chance to participate in a rights
offering that would raise $100 million in new capital for Genco.
Shareholders said in court papers last week
that Genco "engineered an unreasonably low valuation" in a ploy
to enable management and creditors control the company.
Genco board member Harry Perrin was one of three witnesses
to testify on Thursday, though questioning lasted only two hours
and the bulk of evidence is expected to come from testimony
later this month from valuation experts.
The trial is scheduled for Thursday and Friday, as well as
June 23 and 24.
There is no love lost between the shareholder committee
and Genco. The company last month asked its bankruptcy judge to
abolish the committee altogether, although he has not ruled yet.
Genco at the time argued the committee, whose professional
fees are paid by Genco, was essentially forcing the company to
subsidize litigation against it. The company has said equity
holders should be pleased to recover anything because most
corporate bankruptcies wipe out common shareholdings.
The federal government, through the Department of Justice's
bankruptcy regulatory arm, objected to Genco's restructuring
plan over perks it would provide to supporting creditors, namely
payment of legal fees and releases from legal claims.
(Reporting by Nick Brown; Editing by Steve Orlofsky)