| NEW YORK, June 24
NEW YORK, June 24 Lawyers for bankrupt Genco
Shipping & Trading Ltd on Tuesday insisted the dry
bulk shipper is not being undervalued during the closing of a
trial pitting the company against angry shareholders who wanted
better treatment in the restructuring.
The four-day trial in U.S. Bankruptcy Court in Manhattan
posed the question of how to value a shipping company. The
answer will determine what is left for Genco shareholders after
its lenders and other creditors are repaid.
Financial advisers at Blackstone, which was retained by
Genco to value the company, argued the shipper was worth between
$1.36 billion and $1.44 billion based on the market value of its
ships and other assets. Shareholders put the value at $1.91
billion based on financial performance and other factors.
"The issue ... is not how a ship would be valued if it was
sold, because no such sale is taking place," Steven Bierman, a
lawyer for the shareholders, said in closing arguments.
Since Genco's Chapter 11 filing in April, shareholders have
found themselves at odds with the company and just about all its
creditors. They are the only opponents to a restructuring that
would reduce debt by $1.2 billion, split most of the company's
equity among more senior creditors and give existing
shareholders $30 million in warrants.
Judge Sean Lane gave no indication how he may rule, but said
he would issue a decision by July 2.
Far from mom-and-pop investors, the shareholders are hedge
funds that routinely invest in distressed assets and litigate in
hopes of boosting their recoveries. An official committee to
vouch for the shareholders includes Aurelius Capital Management,
Och-Ziff Capital Management and Mohawk Capital.
Genco and its lenders painted the shareholder complaints as
sour grapes, saying they are getting warrants only because Genco
convinced reluctant lenders to provide some payout.
"Equity is not entitled to any recovery," Dennis Dunne, a
lawyer for the lenders, said on Tuesday. "And yet they have
Under Genco's valuation, the company is worth around $80
million less than what it owes creditors; under the
shareholders' valuation, it is worth at least $95 million more
than its debts.
Blackstone's Tim Coleman said his firm looked to net asset
value - or assets minus liabilities - as the only sensible
methodology for a shipper.
If Blackstone's valuation was low, "we'd have a line out the
door like at a Starbucks" of potential investors, Coleman said.
The shareholder group's valuation was done by Rothschild's
Neil Augustine, who looked to earnings and discounted cash flow.
Bierman said that shippers routinely consider various factors in
their own forecasts.
Genco, controlled by its chairman, the shipping magnate Peter
Georgiopoulos, is the latest in a line of shippers to file for
bankruptcy amid a glut of vessels. Nautilus Holdings Ltd filed
for bankruptcy in White Plains, New York, on Monday, while Excel
Maritime Carriers, Overseas Shipholding Group and Georgiopoulos'
own General Maritime have filed in recent years.
(Reporting by Nick Brown in New York; Editing by Tom Hals and