(Adds details from hearing and background throughout)
By Nick Brown
NEW YORK, Del, July 2 A U.S. bankruptcy judge
said he will confirm Genco Shipping & Trading's plan
to exit bankruptcy under the control of its senior creditors,
rejecting arguments by shareholders that the proposal
undervalues the dry bulk shipper's assets.
At a hearing on Wednesday in U.S. Bankruptcy Court in
Manhattan, Judge Sean Lane said he agreed with the company's
estimate that its going concern value was less than $1.5
A committee of shareholders had argued the value could be as
high as $1.91 billion, calling Genco's restructuring a ploy to
hand over control to creditors and management. Under the plan,
existing shareholders would receive just $30 million in
Shares of Genco, which trade over the counter, were down
about 8 percent in afternoon trade at 81 cents each. The shares
had fallen as low as 68 cents.
The ruling follows a four-day trial in Lane's courtroom that
posed the question of how to value a shipping company.
Financial advisers at Blackstone, which was retained by
Genco to value the company, based its estimate on the market
value of its ships and other assets. Shareholders included
financial performance and other factors in their higher
Since Genco's Chapter 11 filing in April, shareholders have
found themselves at odds with the company and just about all its
They were the only opponents to the restructuring, which
Genco says will reduce debt by $1.2 billion while giving 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.
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. The committee appointed by
the U.S. Department of Justice's bankruptcy watchdog to vouch
for the shareholders includes Aurelius Capital Management,
Och-Ziff Capital Management and Mohawk Capital.
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
last month filed for bankruptcy in White Plains, New York, while
Excel Maritime Carriers, Overseas Shipholding Group and
Georgiopoulos' own General Maritime have filed in recent years.
(Reporting by Nick Brown in New York; Writing by Tom Hals in
Wilmington, Delaware; Editing by Marguerita Choy and Lisa