GENCO SHIPPING & TRADING LTD, 10-K filed on 2/28/2018
Annual Report
Document and Entity Information (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Feb. 28, 2018
Jun. 30, 2017
Document and Entity Information
 
 
 
Entity Registrant Name
GENCO SHIPPING & TRADING LTD 
 
 
Entity Central Index Key
0001326200 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2017 
 
 
Amendment Flag
false 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Accelerated Filer 
 
 
Entity Public Float
 
 
$ 79.3 
Entity Common Stock, Shares Outstanding
 
34,532,004 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
FY 
 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 174,479 
$ 133,400 
Restricted cash
7,234 
8,242 
Due from charterers, net of a reserve of $246 and $283, respectively
12,855 
10,373 
Prepaid expenses and other current assets
22,671 
15,750 
Vessels held for sale
 
4,840 
Total current assets
217,239 
172,605 
Noncurrent assets:
 
 
Vessels, net of accumulated depreciation of $213,431 and $163,053, respectively
1,265,577 
1,354,760 
Deferred drydock, net of accumulated amortization of $9,540 and $6,340 respectively
13,382 
12,637 
Fixed assets, net of accumulated depreciation and amortization of $1,003 and $759, respectively
1,014 
1,018 
Other noncurrent assets
514 
514 
Restricted cash
23,233 
27,426 
Total noncurrent assets
1,303,720 
1,396,355 
Total assets
1,520,959 
1,568,960 
Current liabilities:
 
 
Accounts payable and accrued expenses
23,230 
22,885 
Current portion of long-term debt
24,497 
4,576 
Deferred revenue
4,722 
1,488 
Total current liabilities:
52,449 
28,949 
Noncurrent liabilities:
 
 
Long-term lease obligations
2,588 
1,868 
Long-term debt, net of deferred financing costs of $9,032 and $11,357, respectively
490,895 
508,444 
Total noncurrent liabilities
493,483 
510,312 
Total liabilities
545,932 
539,261 
Commitments and contingencies
   
   
Equity:
 
 
Series A Preferred Stock, par value $0.01; aggregate liquidation preference of $0 and $120,789 at December 31, 2017 and December 31, 2016, respectively
 
120,789 
Common stock, par value $0.01; 500,000,000 shares authorized; issued and outstanding 34,532,004 and 7,354,449 shares at December 30, 2017 and December 31, 2016, respectively
345 
74 
Additional paid-in capital
1,628,355 
1,503,784 
Retained deficit
(653,673)
(594,948)
Total equity
975,027 
1,029,699 
Total liabilities and equity
$ 1,520,959 
$ 1,568,960 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2017
Series A Preferred Stock
Dec. 31, 2016
Series A Preferred Stock
Current Assets:
 
 
 
 
Due from charterers, reserve
$ 246 
$ 283 
 
 
Noncurrent assets:
 
 
 
 
Vessels, accumulated depreciation
213,431 
163,053 
 
 
Deferred drydock, accumulated amortization
9,540 
6,340 
 
 
Fixed assets, accumulated depreciation and amortization
1,003 
759 
 
 
Deferred financing costs, noncurrent
9,032 
11,357 
 
 
Genco Shipping & Trading Limited shareholders' equity:
 
 
 
 
Preferred stock, par value (in dollars per share)
 
 
$ 0.01 
$ 0.01 
Aggregate liquidation preference
 
 
$ 0 
$ 120,789 
Common stock, par value (in dollars per share)
$ 0.01 
$ 0.01 
 
 
Common stock, shares authorized (in shares)
500,000,000 
500,000,000 
 
 
Common stock, shares issued (in shares)
34,532,004 
7,354,449 
 
 
Common stock, shares outstanding (in shares)
34,532,004 
7,354,449 
 
 
Consolidated Statements of Operations (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Revenues:
 
 
 
Voyage revenues
$ 209,698 
$ 133,246 
$ 150,784 
Service revenues
 
2,340 
3,175 
Total revenues
209,698 
135,586 
153,959 
Operating expenses:
 
 
 
Voyage expenses
25,321 
13,227 
20,257 
Vessel operating expenses
98,086 
113,636 
122,008 
General and administrative expenses (inclusive of nonvested stock amortization expense of $4,053, $20,680 and $42,136, respectively)
22,190 
45,174 
74,941 
Technical management fees
7,659 
8,932 
8,961 
Depreciation and amortization
71,776 
76,330 
79,556 
Other operating income
(960)
Impairment of vessel assets
21,993 
69,278 
39,893 
(Gain) loss on sale of vessels
(7,712)
(3,555)
1,210 
Total operating expenses
239,313 
322,062 
346,826 
Operating loss
(29,615)
(186,476)
(192,867)
Other (expense) income:
 
 
 
Impairment of investment
 
(2,696)
(37,877)
Other (expense) income
(164)
645 
(796)
Interest income
1,551 
204 
110 
Interest expense
(30,497)
(28,453)
(20,032)
Other expense
(29,110)
(30,300)
(58,595)
Loss before reorganization items, net
(58,725)
(216,776)
(251,462)
Reorganization items, net
 
(272)
(1,085)
Loss before income taxes
(58,725)
(217,048)
(252,547)
Income tax expense
 
(709)
(1,821)
Net loss
(58,725)
(217,757)
(254,368)
Less: Net loss attributable to noncontrolling interest
 
 
(59,471)
Net loss attributable to Genco Shipping & Trading Limited
$ (58,725)
$ (217,757)
$ (194,897)
Net loss per share-basic
$ (1.71)
$ (30.03)
$ (29.61)
Net loss per share-diluted
$ (1.71)
$ (30.03)
$ (29.61)
Weighted average common shares outstanding - Basic (in shares)
34,242,631 
7,251,231 
6,583,163 
Weighted average common shares outstanding - diluted
34,242,631 
7,251,231 
6,583,163 
Consolidated Statements of Operations (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Consolidated Statements of Operations
 
 
 
Nonvested stock amortization expenses
$ 4,053 
$ 20,680 
$ 42,136 
Consolidated Statements of Comprehensive Loss (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Consolidated Statements of Comprehensive Loss
 
 
 
Net loss
$ (58,725)
$ (217,757)
$ (254,368)
Other comprehensive income
 
21 
25,296 
Comprehensive loss
(58,725)
(217,736)
(229,072)
Less: Comprehensive loss attributable to noncontrolling interest
 
 
(59,471)
Comprehensive loss attributable to Genco Shipping & Trading Limited
$ (58,725)
$ (217,736)
$ (169,601)
Consolidated Statements of Equity (USD $)
In Thousands, unless otherwise specified
Series A Preferred Stock
Preferred Stock
Genco Shipping & Trading Limited Shareholders' Equity
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive (Loss) Income
Retained Earnings
Noncontrolling Interest
Total
Balance at Dec. 31, 2014
 
$ 1,044,201 
$ 62 
$ 1,251,750 
$ (25,317)
$ (182,294)
$ 248,573 
$ 1,292,774 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
 
 
Net loss
 
(194,897)
 
 
 
(194,897)
(59,471)
(254,368)
Other comprehensive income
 
25,296 
 
 
25,296 
 
 
25,296 
Settlement of non-accredited Note holders
 
(462)
 
(462)
 
 
 
(462)
Equity effect of purchase of entities under common control
 
590 
 
590 
 
 
 
590 
Issuance of shares
 
 
11 
(11)
 
 
 
 
Elimination of non-controlling interest due to Merger
 
194,375 
 
194,375 
 
 
(194,375)
 
Nonvested stock amortization
 
36,863 
 
36,863 
 
 
5,273 
42,136 
Balance at Dec. 31, 2015
 
1,105,966 
73 
1,483,105 
(21)
(377,191)
 
1,105,966 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
 
 
Net loss
 
(217,757)
 
 
 
(217,757)
 
(217,757)
Other comprehensive income
 
21 
 
 
21 
 
 
21 
Issuance of shares
120,789 
120,789 
 
 
 
 
 
120,789 
Issuance of 61,244 shares of nonvested stock
 
 
(1)
 
 
 
 
Nonvested stock amortization
 
20,680 
 
20,680 
 
 
 
20,680 
Balance at Dec. 31, 2016
120,789 
1,029,699 
74 
1,503,784 
 
(594,948)
 
1,029,699 
Increase (Decrease) in Shareholders' Equity
 
 
 
 
 
 
 
 
Net loss
 
(58,725)
 
 
 
(58,725)
 
(58,725)
Conversion of 27,061,856 shares of Series A Preferred Stock
(120,789)
 
270 
120,519 
 
 
 
 
Issuance of 115,700 and 3,138 shares of vested RSUs for the years ended 2017 and 2016, respectively
 
 
(1)
 
 
 
 
Nonvested stock amortization
 
4,053 
 
4,053 
 
 
 
4,053 
Balance at Dec. 31, 2017
 
$ 975,027 
$ 345 
$ 1,628,355 
 
$ (653,673)
 
$ 975,027 
Consolidated Statements of Equity (Parenthetical)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Issuance of shares of nonvested stock (in shares)
 
61,244 
Issuance of shares of RSUs (in shares)
115,700 
3,138 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2017
Secured Debt
2014 Term Loan Facilities
Dec. 31, 2016
Secured Debt
2014 Term Loan Facilities
Dec. 31, 2015
Secured Debt
2014 Term Loan Facilities
Dec. 31, 2017
Revolving Credit Facility
2015 Revolving Credit Facility
Dec. 31, 2016
Revolving Credit Facility
2015 Revolving Credit Facility
Dec. 31, 2015
Revolving Credit Facility
2015 Revolving Credit Facility
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
Net loss
$ (58,725)
$ (217,757)
$ (254,368)
 
 
 
 
 
 
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
 
 
Depreciation and amortization
71,776 
76,330 
79,556 
 
 
 
 
 
 
Amortization of deferred financing costs
2,325 
2,847 
2,379 
 
 
 
 
 
 
PIK interest, net
4,542 
800 
 
 
 
 
 
 
 
Amortization of nonvested stock compensation expense
4,053 
20,680 
42,136 
 
 
 
 
 
 
Impairment of vessel assets
21,993 
69,278 
39,893 
 
 
 
 
 
 
(Gain) loss on sale of vessels
(7,712)
(3,555)
900 
 
 
 
 
 
 
Impairment of investment
 
2,696 
37,877 
 
 
 
 
 
 
Realized (gain) loss on sale of investment
 
(689)
724 
 
 
 
 
 
 
Change in assets and liabilities:
 
 
 
 
 
 
 
 
 
(Increase) decrease in due from charterers
(2,482)
213 
4,153 
 
 
 
 
 
 
(Increase) decrease in prepaid expenses and other current assets
(6,921)
5,485 
1,181 
 
 
 
 
 
 
Increase (decrease) in accounts payable and accrued expenses
1,494 
(5,309)
1,883 
 
 
 
 
 
 
Increase (decrease) in deferred revenue
3,234 
430 
(339)
 
 
 
 
 
 
Increase in lease obligations
720 
719 
759 
 
 
 
 
 
 
Deferred drydock costs incurred
(7,782)
(2,150)
(12,820)
 
 
 
 
 
 
Net cash provided by (used in) operating activities
26,515 
(49,982)
(56,086)
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Purchase of vessels, including deposits
(262)
(458)
(66,590)
 
 
 
 
 
 
Purchase of other fixed assets
(290)
(329)
(770)
 
 
 
 
 
 
Net proceeds from sale of vessel assets
15,513 
13,024 
 
 
 
 
 
 
 
Sale of AFS securities
 
10,489 
706 
 
 
 
 
 
 
Net cash provided by (used in) investing activities
14,961 
22,726 
(66,654)
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Proceeds from Credit Facility
 
 
 
 
 
 
 
 
56,218 
Repayment of Credit Facility
 
 
 
 
 
 
(56,218)
Repayments on Term Loan Facility
 
 
 
(2,763)
(2,763)
(2,081)
 
 
 
Cash settlement of non-accredited Note holders
 
(101)
(777)
 
 
 
 
 
 
Proceeds from issuance of Series A Preferred Stock
 
125,000 
 
 
 
 
 
 
 
Payment of Series A Preferred Stock issuance costs
(1,103)
(3,108)
 
 
 
 
 
 
 
Payment of deferred financing costs
 
(1,500)
(7,003)
 
 
 
 
 
 
Net cash (used in) provided by financing activities
(5,598)
55,435 
150,520 
 
 
 
 
 
 
Net increase in cash, cash equivalents and restricted cash
35,878 
28,179 
27,780 
 
 
 
 
 
 
Cash, cash equivalents and restricted cash at beginning of period
169,068 
140,889 
113,109 
 
 
 
 
 
 
Cash, cash equivalents and restricted cash at end of period
$ 204,946 
$ 169,068 
$ 140,889 
 
 
 
 
 
 
Consolidated Statements of Cash Flows (Parenthetical) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2016
$100 Million Term Loan Facility
Secured Debt
Dec. 31, 2015
$100 Million Term Loan Facility
Secured Debt
Aug. 12, 2010
$100 Million Term Loan Facility
Secured Debt
Dec. 31, 2016
$253 Million Term Loan Facility
Secured Debt
Dec. 31, 2015
$253 Million Term Loan Facility
Secured Debt
Aug. 20, 2010
$253 Million Term Loan Facility
Secured Debt
Dec. 31, 2016
$44 Million Term Loan Facility
Secured Debt
Dec. 31, 2015
$44 Million Term Loan Facility
Secured Debt
Dec. 3, 2013
$44 Million Term Loan Facility
Secured Debt
Dec. 31, 2017
$98 Million Credit Facility
Line of Credit Facility
Dec. 31, 2016
$98 Million Credit Facility
Line of Credit Facility
Nov. 15, 2016
$98 Million Credit Facility
Line of Credit Facility
Dec. 31, 2015
$98 Million Credit Facility
Line of Credit Facility
Nov. 4, 2015
$98 Million Credit Facility
Line of Credit Facility
Dec. 31, 2017
$148 Million Credit Facility
Line of Credit Facility
Dec. 31, 2016
$148 Million Credit Facility
Line of Credit Facility
Dec. 31, 2015
$148 Million Credit Facility
Line of Credit Facility
Jul. 14, 2015
$148 Million Credit Facility
Line of Credit Facility
Dec. 31, 2014
$148 Million Credit Facility
Line of Credit Facility
Dec. 31, 2016
$22 Million Term Loan Facility
Secured Debt
Dec. 31, 2015
$22 Million Term Loan Facility
Secured Debt
Jul. 14, 2015
$22 Million Term Loan Facility
Secured Debt
Aug. 30, 2013
$22 Million Term Loan Facility
Secured Debt
Maximum borrowing capacity
$ 100,000 
$ 100,000 
$ 100,000 
$ 253,000 
$ 253,000 
$ 253,000 
$ 44,000 
$ 44,000 
$ 44,000 
$ 98,000 
$ 98,000 
$ 98,000 
$ 98,000 
$ 98,000 
$ 148,000 
$ 148,000 
$ 148,000 
$ 148,000 
$ 148,000 
$ 22,000 
$ 22,000 
$ 22,000 
$ 22,000 
GENERAL INFORMATION
GENERAL INFORMATION

Genco Shipping & Trading Limited

(U.S. Dollars in Thousands)

Notes to Consolidated Financial Statements for the Years Ended December 31, 2017, 2016 and 2015

 

1 - GENERAL INFORMATION

 

The accompanying consolidated financial statements include the accounts of Genco Shipping & Trading Limited (“GS&T”) and its direct and indirect wholly-owned subsidiaries (collectively, the “Company”). The Company is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels. GS&T is incorporated under the laws of the Marshall Islands and as of December 31, 2017, is the direct or indirect owner of all of the outstanding shares or limited liability company interests of the following subsidiaries: Genco Ship Management LLC; Genco Investments LLC; Genco RE Investments LLC; Genco Shipping Pte. Ltd.; Baltic Trading Limited; and the ship-owning subsidiaries as set forth below under “Other General Information.”  As of December 31, 2017, Genco Ship Management LLC is the sole owner of all of the outstanding limited liability company interests of Genco Management (USA) Limited.

 

On April 15, 2016, the shareholders of the Company approved, at a Special Meeting of Shareholders (the “Special Meeting”), proposals to amend the Second Amended and Restated Articles of Incorporation of the Company to (i) increase the number of authorized shares of common stock of the Company from 250,000,000 to 500,000,000 and (ii) authorize the issuance of up to 100,000,000 shares of preferred stock, in one or more classes or series as determined by the Board of Directors of the Company. The authorized shares did not change as a result of the reverse stock split as discussed below. Following the Special Meeting on such date, the Company filed Articles of Amendment of its Second Amended and Restated Articles of Incorporation with the Registrar of Corporations of the Republic of the Marshall Islands to implement to the foregoing amendments. Additionally, at the Special Meeting, the shareholders of the Company approved a proposal to amend the Second Amended and Restated Articles of Incorporation of the Company to effect a reverse stock split of the issued and outstanding shares of Common Stock at a ratio between 1-for-2 and 1-for-25 with such reverse stock split to be effective at such time and date, if at all, as determined by the Board of Directors of the Company, but no later than one year after shareholder approval thereof.  On July 7, 2016, the Company completed a one-for-ten reverse stock split of its common stock. 

 

On October 13, 2016, Peter C. Georgiopoulos resigned as Chairman of the Board and a director of the Company.  The Board of Directors appointed Arthur L. Regan, a current director of the Company, as Interim Executive Chairman of the Board.  In connection with his departure, Mr. Georgiopoulos entered into a Separation Agreement and a Release Agreement with the Company on October 13, 2016.  Under the terms of these agreements, subject to customary conditions, Mr. Georgiopoulos received an amount equal to the annual Chairman’s fee awarded to him in recent years of $500 as a severance payment and full vesting of his unvested equity awards, which consisted of grants of 68,581 restricted shares of the Company’s common stock and warrants exercisable for approximately 213,937 shares of the Company’s common stock with an exercise price per share ranging $259.10 to $341.90.  Refer to Note 18 — Stock-Based Compensation.  The agreements also contain customary provisions pertaining to confidential information, releases of claims by Mr. Georgiopoulos, and other restrictive covenants.

 

On November 15, 2016, pursuant to the Purchase Agreements (as defined in Note 8 — Debt), the Company completed the private placement of 27,061,856 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) which included 25,773,196 shares at a price per share of $4.85 and an additional 1,288,660 shares issued as a commitment fee on a pro rata basis.  The Company received net proceeds of $120,789 after deducting placement agents’ fees and expenses.  On January 4, 2017, the Company’s shareholders approved at a Special Meeting of Shareholders the issuance of up to 27,061,856 shares of common stock of the Company upon the conversion of shares of the Series A Preferred Stock, par value $0.01 per share, which were purchased by certain investors in a private placement (the “Conversion Proposal”).  As a result of shareholder approval of the Conversion Proposal, all outstanding 27,061,856 shares of Series A Preferred Stock were automatically and mandatorily converted into 27,061,856 shares of common stock of the Company on January 4, 2017.

 

Merger Agreement with Baltic Trading

 

On April 7, 2015, the Company entered into a definitive merger agreement with Baltic Trading Limited ("Baltic Trading") under which the Company acquired Baltic Trading in a stock-for-stock transaction (the “Merger”).  Under the terms of the agreement, Baltic Trading became an indirect wholly-owned subsidiary of the Company, and Baltic Trading shareholders (other than the Company and its subsidiaries) received 0.216 shares of the Company’s common stock for each share of Baltic Trading’s common stock they owned at closing, with fractional shares settled in cash.  Upon consummation of the transaction on July 17, 2015, the Company’s shareholders owned approximately 84.5% of the combined company, and former Baltic Trading’s shareholders (other than the Company and its subsidiaries) owned approximately 15.5% of the combined company.  Shares of Baltic Trading’s Class B stock (all of which were owned by the Company) were canceled in the Merger.  The Company’s common stock began trading on the New York Stock Exchange after consummation of the transaction on July 20, 2015.  The Boards of Directors of both the Company and Baltic Trading established independent special committees to review the transaction and negotiate the terms on behalf of their respective companies.  Both independent special committees unanimously approved the transaction.  The Boards of Directors of both companies approved the Merger by unanimous vote of directors present and voting, with Peter C. Georgiopoulos, former Chairman of the Board of each company, recusing for the vote.  The Merger was approved on July 17, 2015 at the 2015 Annual Meeting of Shareholders (the “2015 Annual Meeting”).

 

Prior to the completion of the Merger, the Company prepared its consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and consolidated the operations of Baltic Trading. The Baltic Trading common shares that the Company acquired in the Merger were previously recognized as a noncontrolling interest in the consolidated financial statements of the Company. Under U.S. GAAP, changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary are considered equity transactions (i.e. transactions with owners in their capacity as owners) with any difference between the amount by which the noncontrolling interest is adjusted and the fair value of the consideration paid attributed to the equity of the parent. Accordingly, any difference between the fair value of the Company’s common shares issued in exchange for Baltic Trading common shares pursuant to the Merger was reflected as an adjustment to the equity in the Company. No gain or loss was recognized in the Company’s Consolidated Statement of Comprehensive Loss upon completion of the transaction.

 

Acquisition of Baltic Lion and Baltic Tiger

 

Additionally, on April 7, 2015, the Company entered into an agreement under which the Company acquired all of the shares of two single-purpose vessel owning entities that were wholly owned by Baltic Trading, each of which owned one Capesize drybulk vessel, specifically the Baltic Lion and Baltic Tiger, for an aggregate purchase price of $68,500, subject to reduction for $40,563 of outstanding first-mortgage debt of such single-purpose entities that was guaranteed by the Company.  For further details, refer to the “Impairment of long-lived assets” section in Note 2 — Summary of Significant Accounting Policies.  These transactions, which closed on April 8, 2015, were accounted for pursuant to accounting guidance under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, “Business Combinations” (“ASC 805”), for transactions amongst entities under common control.  Accordingly, the difference between the cash paid to Baltic Trading and the Company’s carrying value of the Baltic Lion and Baltic Tiger as of the closing date of $590 was reflected as an adjustment to Additional paid-in capital in the Consolidated Statements of Equity during the year ended December 31, 2015.  The independent special committees of both companies’ Boards of Directors reviewed and approved these transactions.

 

Other General Information

 

At December 31, 2017, 2016 and 2015, the Company’s fleet, including Baltic Trading vessels, consisted of 60,  65 and 70 vessels, respectively.

 

Below is the list of Company’s wholly owned ship-owning subsidiaries as of December 31, 2017:

 

 

 

 

 

 

 

 

 

 

 

Wholly Owned Subsidiaries

    

Vessel Acquired

    

Dwt

    

Delivery Date

    

Year Built

 

 

 

 

 

 

 

 

 

 

 

Genco Vigour Limited

 

Genco Vigour

 

73,941

 

12/15/04

 

1999

 

Genco Explorer Limited

 

Genco Explorer

 

29,952

 

12/17/04

 

1999

 

Genco Progress Limited

 

Genco Progress

 

29,952

 

1/12/05

 

1999

 

Genco Beauty Limited

 

Genco Beauty

 

73,941

 

2/7/05

 

1999

 

Genco Knight Limited

 

Genco Knight

 

73,941

 

2/16/05

 

1999

 

Genco Muse Limited

 

Genco Muse

 

48,913

 

10/14/05

 

2001

 

Genco Surprise Limited

 

Genco Surprise

 

72,495

 

11/17/06

 

1998

 

Genco Augustus Limited

 

Genco Augustus

 

180,151

 

8/17/07

 

2007

 

Genco Tiberius Limited

 

Genco Tiberius

 

175,874

 

8/28/07

 

2007

 

Genco London Limited

 

Genco London

 

177,833

 

9/28/07

 

2007

 

Genco Titus Limited

 

Genco Titus

 

177,729

 

11/15/07

 

2007

 

Genco Challenger Limited

 

Genco Challenger

 

28,428

 

12/14/07

 

2003

 

Genco Charger Limited

 

Genco Charger

 

28,398

 

12/14/07

 

2005

 

Genco Warrior Limited

 

Genco Warrior

 

55,435

 

12/17/07

 

2005

 

Genco Predator Limited

 

Genco Predator

 

55,407

 

12/20/07

 

2005

 

Genco Hunter Limited

 

Genco Hunter

 

58,729

 

12/20/07

 

2007

 

Genco Champion Limited

 

Genco Champion

 

28,445

 

1/2/08

 

2006

 

Genco Constantine Limited

 

Genco Constantine

 

180,183

 

2/21/08

 

2008

 

Genco Raptor LLC

 

Genco Raptor

 

76,499

 

6/23/08

 

2007

 

Genco Cavalier LLC

 

Genco Cavalier

 

53,617

 

7/17/08

 

2007

 

Genco Thunder LLC

 

Genco Thunder

 

76,588

 

9/25/08

 

2007

 

Genco Hadrian Limited

 

Genco Hadrian

 

169,025

 

12/29/08

 

2008

 

Genco Commodus Limited

 

Genco Commodus

 

169,098

 

7/22/09

 

2009

 

Genco Maximus Limited

 

Genco Maximus

 

169,025

 

9/18/09

 

2009

 

Genco Claudius Limited

 

Genco Claudius

 

169,001

 

12/30/09

 

2010

 

Genco Bay Limited

 

Genco Bay

 

34,296

 

8/24/10

 

2010

 

Genco Ocean Limited

 

Genco Ocean

 

34,409

 

7/26/10

 

2010

 

Genco Avra Limited

 

Genco Avra

 

34,391

 

5/12/11

 

2011

 

Genco Mare Limited

 

Genco Mare

 

34,428

 

7/20/11

 

2011

 

Genco Spirit Limited

 

Genco Spirit

 

34,432

 

11/10/11

 

2011

 

Genco Aquitaine Limited

 

Genco Aquitaine

 

57,981

 

8/18/10

 

2009

 

Genco Ardennes Limited

 

Genco Ardennes

 

58,018

 

8/31/10

 

2009

 

Genco Auvergne Limited

 

Genco Auvergne

 

58,020

 

8/16/10

 

2009

 

Genco Bourgogne Limited

 

Genco Bourgogne

 

58,018

 

8/24/10

 

2010

 

Genco Brittany Limited

 

Genco Brittany

 

58,018

 

9/23/10

 

2010

 

Genco Languedoc Limited

 

Genco Languedoc

 

58,018

 

9/29/10

 

2010

 

Genco Loire Limited

 

Genco Loire

 

53,430

 

8/4/10

 

2009

 

Genco Lorraine Limited

 

Genco Lorraine

 

53,417

 

7/29/10

 

2009

 

Genco Normandy Limited

 

Genco Normandy

 

53,596

 

8/10/10

 

2007

 

Genco Picardy Limited

 

Genco Picardy

 

55,257

 

8/16/10

 

2005

 

Genco Provence Limited

 

Genco Provence

 

55,317

 

8/23/10

 

2004

 

Genco Pyrenees Limited

 

Genco Pyrenees

 

58,018

 

8/10/10

 

2010

 

Genco Rhone Limited

 

Genco Rhone

 

58,018

 

3/29/11

 

2011

 

Baltic Lion Limited

 

Baltic Lion

 

179,185

 

4/8/15

(1)

2012

 

Baltic Tiger Limited

 

Genco Tiger

 

179,185

 

4/8/15

(1)

2011

 

Baltic Leopard Limited

 

Baltic Leopard

 

53,446

 

4/8/10

(2)

2009

 

Baltic Panther Limited

 

Baltic Panther

 

53,350

 

4/29/10

(2)

2009

 

Baltic Cougar Limited

 

Baltic Cougar

 

53,432

 

5/28/10

(2)

2009

 

Baltic Jaguar Limited

 

Baltic Jaguar

 

53,473

 

5/14/10

(2)

2009

 

Baltic Bear Limited

 

Baltic Bear

 

177,717

 

5/14/10

(2)

2010

 

Baltic Wolf Limited

 

Baltic Wolf

 

177,752

 

10/14/10

(2)

2010

 

Baltic Wind Limited

 

Baltic Wind

 

34,408

 

8/4/10

(2)

2009

 

Baltic Cove Limited

 

Baltic Cove

 

34,403

 

8/23/10

(2)

2010

 

Baltic Breeze Limited

 

Baltic Breeze

 

34,386

 

10/12/10

(2)

2010

 

Baltic Fox Limited

 

Baltic Fox

 

31,883

 

9/6/13

(2)

2010

 

Baltic Hare Limited

 

Baltic Hare

 

31,887

 

9/5/13

(2)

2009

 

Baltic Hornet Limited

 

Baltic Hornet

 

63,574

 

10/29/14

(2)

2014

 

Baltic Wasp Limited

 

Baltic Wasp

 

63,389

 

1/2/15

(2)

2015

 

Baltic Scorpion Limited

 

Baltic Scorpion

 

63,462

 

8/6/15

 

2015

 

Baltic Mantis Limited

 

Baltic Mantis

 

63,470

 

10/9/15

 

2015

 


(1)

The delivery date for these vessels represents the date that the vessel was purchased from Baltic Trading.

(2)

The delivery date for these vessels represents the date that the vessel was delivered to Baltic Trading.

 

The Company formerly provided technical services for drybulk vessels purchased by Maritime Equity Partners (“MEP”).  These services included oversight of crew management, insurance, drydocking, ship operations and financial statement preparation, but did not include chartering services.  The services were initially provided for a fee of $750 per ship per day plus reimbursement of out-of-pocket costs and were provided for an initial term of one year.   On September 30, 2015, under the oversight of an independent committee of the Company’s Board of Directors, Genco Management (USA) Limited and MEP entered into certain agreements under which MEP paid $2,178 of the amount of service fees in arrears (of which $261 was paid in 2016 by the new owners of five of the MEP vessels sold in January 2016 as described below) and the daily service fee was reduced from $750 to $650 per day effective on October 1, 2015. During January 2016, five of MEP’s vessels were sold to third-parties and were no longer subject to the agency agreement.  Based upon the September 30, 2015 agreement, termination fees were due in the amount of $296 which was assumed by the new owners of the five MEP vessels that were sold and were paid in full during February 2016.  Additionally, during the three months ended September 30, 2016, the remaining seven of MEP’s vessels were sold to third parties, and the agency agreement was deemed terminated upon the sale of these vessels.  Based upon the September 30, 2015 agreement, termination fees were due in the amount of $830, which was assumed by the new owners of the seven MEP vessels that were sold and were paid in full as of September 30, 2016.  MEP has been dissolved and all previous amounts have been settled as of December 31, 2016.  Refer to Note 7 — Related Party Transactions. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of consolidation

 

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP which includes the accounts of GS&T and its direct and indirect wholly-owned subsidiaries, including Baltic Trading.  All intercompany accounts and transactions have been eliminated in consolidation.

 

Business geographics

 

The Company’s vessels regularly move between countries in international waters, over hundreds of trade routes and, as a result, the disclosure of geographic information is impracticable.

 

Vessel acquisitions

 

When the Company enters into an acquisition transaction, it determines whether the acquisition transaction was the purchase of an asset or a business based on the facts and circumstances of the transaction.  As is customary in the shipping industry, the purchase of a vessel is normally treated as a purchase of an asset as the historical operating data for the vessel is not reviewed nor is it material to the Company’s decision to make such acquisition.

 

When a vessel is acquired with an existing time charter, the Company allocates the purchase price to the vessel and the time charter based on, among other things, vessel market valuations and the present value (using an interest rate which reflects the risks associated with the acquired charters) of the difference between (i) the contractual amounts to be paid pursuant to the charter terms and (ii) management’s estimate of the fair market charter rate, measured over a period equal to the remaining term of the charter.  The capitalized above-market (assets) and below-market (liabilities) charters are amortized as a reduction or increase, respectively, to voyage revenues over the remaining term of the charter.

 

Segment reporting

 

The Company reports financial information and evaluates its operation by voyage revenues and not by the length of ship employment for its customers, i.e., spot or time charters.  Each of the Company’s vessels serve the same type of customer, have similar operation and maintenance requirements, operate in the same regulatory environment, and are subject to similar economic characteristics. Based on this, the Company has determined that it operates in one reportable segment, after the effective date of the Merger on July 17, 2015, which is engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels.  Prior to the Merger, the Company had two reportable operating segments, GS&T and Baltic Trading.

 

Revenue and voyage expense recognition

 

Since the Company’s inception, revenues have been generated from time charter agreements, spot market voyage charters, pool agreements and spot market-related time charters.  A time charter involves placing a vessel at the charterer’s disposal for a set period of time during which the charterer may use the vessel in return for the payment by the charterer of a specified daily hire rate, including any ballast bonus payments received pursuant to the time charter agreement.  Spot market-related time charters are the same as other time charter agreements, except the time charter rates are variable and are based on a percentage of the average daily rates as published by the Baltic Dry Index (“BDI”).  Voyage revenues also include the sale of bunkers consumed during short-term time charters pursuant to the terms of the time charter agreement.

 

The Company records time charter revenues over the term of the charter as service is provided.  Revenues are recognized on a straight-line basis as the average revenue over the term of the respective time charter agreement.  The Company records spot market-related time charter revenues over the term of the charter as service is provided based on the rate determined based on the BDI for each respective billing period.  As such, the revenue earned by the Company’s vessels that are on spot market-related time charters is subject to fluctuations of the spot market. 

 

Revenue for spot market voyage charters is recognized ratably over the total transit time of each voyage, which commences at the time the vessel departs from its last discharge port and ends at the time the discharge of cargo is completed at the discharge port.  The Company does not begin recognizing revenue until an agreement has been entered into between the charterer and the Company, even if the vessel has discharged its cargo and is sailing to the anticipated load port on its next voyage.

 

In time charters, spot market-related time charters and pool agreements, operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel and specified voyage costs such as fuel and port charges are paid by the charterer. These expenses are borne by the Company during spot market voyage charters.  As such, there are significantly higher voyage expenses for spot market voyage charters as compared to time charters, spot market-related time charters and pool agreements. There are certain other non-specified voyage expenses, such as commissions, which are typically borne by the Company. At the inception of a time charter, the Company records the difference between the cost of bunker fuel delivered by the terminating charterer and the bunker fuel sold to the new charterer as a gain or loss within voyage expenses. Additionally, the Company records lower of cost or market adjustments to re-value the bunker fuel on a quarterly basis, as required.  These differences in bunkers, including lower of cost or market adjustments, resulted in a net gain (loss) of $2,021,  ($4,920) and ($8,927) during the years ended December 31, 2017, 2016 and 2015, respectively. Additionally, voyage expenses include the cost of bunkers consumed during short-term time charters pursuant to the terms of the time charter agreement.  The Company recognizes voyage expenses when incurred.

 

During the years ended December 31, 2017 and 2016, six of the Company’s vessels were chartered under spot-market related time charters which included a profit-sharing element, the Genco Commodus, Baltic Lion, Genco London, Genco Maximus, Baltic Wasp and Baltic Wolf.  These time charters all ended during the year ended December 31, 2017.  Under these charter agreements, the rate for the spot market-related time charter was linked to a floor of $3 with a 50% index-based profit sharing component. During the year ended December 31, 2015, there were no time charters with profit-sharing elements.

 

At December 31, 2017 and 2016, 0 and 20 of the Company’s vessels were in vessel pools, respectively.  At December 31, 2016, the Company had 13 vessels operating in the Clipper Logger Pool and the Clipper Sapphire Pool, vessel pools trading in the spot market for which Clipper Group acts as the pool manager.  Additionally, at December 31, 2016, the Company had seven vessels operating in the Bulkhandling Handymax A/S Pool, a vessel pool trading in the spot market for which Torvald Klaveness acts as pool manager.  Under pool arrangements, the vessels operate under a time charter agreement whereby the cost of bunkers and port expenses are borne by the pool and operating costs including crews, maintenance and insurance are typically paid by the owner of the vessel.  Since the members of the pool share in the revenue less voyage expenses generated by the entire group of vessels in the pool, and the pool operates in the spot market, the revenue earned by these vessels is subject to the fluctuations of the spot market.  The Company recognizes revenue from these pool arrangements based on its portion of the net distributions reported by the relevant pool, which represents the net voyage revenue of the pool after voyage expenses and pool manager fees.

 

Other operating income

 

During the years ended December 31, 2017, 2016 and 2015, the Company recorded other operating income of $0,  $960 and $0, respectively.  Other Operating income recorded during the year ended December 31, 2016 consists primarily of $934 received from Samsun Logix Corporation (“Samsun”) pursuant to the revised rehabilitation plan that was approved by the South Korean courts on April 8, 2016 which was settled in full on October 27, 2016.  Refer to Note 16 — Commitments and Contingencies for further information regarding the bankruptcy settlement with Samsun.

 

Due from charterers, net

 

Due from charterers, net includes accounts receivable from charters, net of the provision for doubtful accounts.  At each balance sheet date, the Company records the provision based on a review of all outstanding charter receivables.  Included in the standard time charter contracts with the Company’s customers are certain performance parameters which, if not met, can result in customer claims.  As of December 31, 2017 and 2016, the Company had a reserve of $246 and $283, respectively, against the due from charterers balance and an additional accrual of $327 and $220, respectively, in deferred revenue, each of which is primarily associated with estimated customer claims against the Company including vessel performance issues under time charter agreements.

 

Revenue is based on contracted charterparties.  However, there is always the possibility of dispute over terms and payment of hires and freights.  In particular, disagreements may arise concerning the responsibility of lost time and revenue.  Accordingly, the Company periodically assesses the recoverability of amounts outstanding and estimates a provision if there is a possibility of non-recoverability.  The Company believes its provisions to be reasonable based on information available.

 

Inventories

 

Inventories consist of consumable bunkers, lubricants and victualling stores, which are stated at the lower of cost or market value, if required, and are recorded in Prepaid expenses and other current assets in the Consolidated Balance Sheets.  Cost is determined by the first in, first out method. 

 

Vessel operating expenses

 

Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance, the cost of spares and consumable stores, and other miscellaneous expenses.  Vessel operating expenses are recognized when incurred.

 

Vessels, net

 

Vessels, net is stated at cost less accumulated depreciation. Included in vessel costs are acquisition costs directly attributable to the acquisition of a vessel and expenditures made to prepare the vessel for its initial voyage. The Company also capitalizes interest costs for a vessel under construction as a cost that is directly attributable to the acquisition of a vessel. Vessels are depreciated on a straight-line basis over their estimated useful lives, determined to be 25 years from the date of initial delivery from the shipyard. Depreciation expense for vessels for the years ended December 31, 2017, 2016 and 2015 was $66,514,  $71,829 and $76,395, respectively. 

 

Depreciation expense is calculated based on cost less the estimated residual scrap value. The costs of significant replacements, renewals and betterments are capitalized and depreciated over the shorter of the vessel’s remaining estimated useful life or the estimated life of the renewal or betterment. Undepreciated cost of any asset component being replaced that was acquired after the initial vessel purchase is written off as a component of vessel operating expense. Expenditures for routine maintenance and repairs are expensed as incurred. Scrap value is estimated by the Company by taking the estimated scrap value of  $310 per lightweight ton (“lwt”) times the weight of the vessel noted in lwt.

 

Vessels held for sale

 

During December 2016, the Board of Directors authorized the sale of the Genco Success, Genco Prosperity and Genco Wisdom.  As such, these vessel assets were classified as held for sale in the Consolidated Balance Sheet as of December 31, 2016.  These vessels were sold during the year ended December 31, 2017.  Refer to Note 4 — Vessel Acquisitions and Dispositions for additional information.

           

Fixed assets, net

 

Fixed assets, net is stated at cost less accumulated depreciation and amortization.  Depreciation and amortization are based on a straight line basis over the estimated useful life of the specific asset placed in service.  The following table is used in determining the typical estimated useful lives:

 

 

 

 

 

 

 

Description

    

Useful lives

 

 

 

 

 

 

Leasehold improvements

 

Lesser of the estimated useful life of the asset or life of the lease

Furniture, fixtures & other equipment

 

5 years

Vessel equipment

 

2-15 years

Computer equipment

 

3 years

 

Depreciation and amortization expense for fixed assets for the years ended December 31, 2017, 2016 and 2015 was $274, $388 and $284, respectively. 

 

Deferred drydocking costs

 

The Company’s vessels are required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are operating.  The Company defers the costs associated with the drydockings as they occur and amortizes these costs on a straight-line basis over the period between drydockings.  Costs deferred as part of a vessel’s drydocking include actual costs incurred at the drydocking yard; cost of travel, lodging and subsistence of personnel sent to the drydocking site to supervise; and the cost of hiring a third party to oversee the drydocking.  If the vessel is drydocked earlier than originally anticipated, any remaining deferred drydock costs that have not been amortized are expensed at the end of the next drydock.

 

Amortization expense for drydocking for the years ended December 31, 2017, 2016 and 2015 was $4,988,  $4,113 and $2,877, respectively, and is included in Depreciation and amortization expense in the Consolidated Statements of Operation.  All other costs incurred during drydocking are expensed as incurred.

 

Impairment of long-lived assets

 

During the years ended December 31, 2017, 2016 and 2015 the Company recorded $21,993,  $69,278 and $39,893, respectively, related to the impairment of vessel assets in accordance with ASC 360 — “Property, Plant and Equipment” (“ASC 360”).  ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts.  If indicators of impairment are present, the Company performs an analysis of the anticipated undiscounted future net cash flows to be derived from the related long-lived assets. 

 

On August 4, 2017, the Board of Directors determined to dispose of the Company’s vessels built in 1999, namely the Genco Beauty, the Genco Explorer, the Genco Knight, the Genco Progress and the Genco Vigour, at times and on terms to be determined in the future.  Given this decision, and that the estimated future undiscounted cash flows for each of these older vessels did not exceed the net book value for each vessel, the Company has adjusted the values of these older vessels to their respective fair market values during the year ended December 31, 2017.  This resulted in an impairment loss of $18,654 during the year ended December 31, 2017.

 

At June 30, 2017, the Company determined that the sum of the estimated undiscounted future cash flows attributable to the Genco Surprise did not exceed the carrying value of the vessel at June 30, 2017 and reduced the carrying value of the Genco Surprise, a 1998-built Panamax vessel, to its fair market value as of June 30, 2017.  This resulted in an impairment loss of $3,339 during the year ended December 31, 2017. 

 

At June 8, 2016, the Company determined that the scrapping of nine of its vessels, the Genco Acheron, Genco Carrier, Genco Leader, Genco Pioneer, Genco Prosperity, Genco Reliance, Genco Success, Genco Sugar, and Genco Wisdom, was more likely than not pursuant to the Commitment Letter entered into for the $400 Million Credit Facility as defined and disclosed in Note 8 — Debt.  Therefore, at June 8, 2016, the time utilized to determine the recoverability of the carrying value of the vessel assets was significantly reduced.  After determining that the sum of the estimated undiscounted future cash flows attributable to the aforementioned nine vessels did not exceed the carrying value of the vessels at June 8, 2016, the Company reduced the carrying value of the nine vessels to their net realizable value, which was based on the expected net proceeds from scrapping the vessels.  This resulted in an impairment loss of $67,594 during the year ended December 31, 2016.  Refer to Note 4 — Vessel Acquisitions and Dispositions for further information about the sale of these vessels.

 

At March 31, 2016, the Company determined that the scrapping of the Genco Marine was more likely than not based on discussions with the Company’s Board of Directors.  Therefore, at March 31, 2016, the time utilized to determine the recoverability of the carrying value of the vessel asset was significantly reduced.  After determining that the sum of the estimated undiscounted future cash flows attributable to the Genco Marine did not exceed the carrying value of the vessel at March 31, 2016, the Company reduced the carrying value of the Genco Marine to its net realizable value, which was based on the expected proceeds from scrapping the vessel.  This resulted in an impairment loss of $1,684 during the year ended December 31, 2016.  On April 5, 2016, the Board of Directors unanimously approved scrapping the Genco Marine and the sale of the Genco Marine to the scrap yard was completed on May 17, 2016. 

 

At December 31, 2015, the Company determined that the future undiscounted cash flows did not exceed the net book value for the Genco Marine.  As such, a $4,497 impairment loss was recorded in order to adjust the value of the Genco Marine to its fair market value during the year ended December 31, 2015. 

 

Lastly, at March 31, 2015, the Company determined that the sale of the Baltic Lion and Baltic Tiger was more likely than not based on Baltic Trading’s expressed consideration to divest of those vessels.  Therefore, at March 31, 2015, the time utilized to determine the recoverability of the carrying value of the vessel assets was significantly reduced, and after determining that the sum of the estimated undiscounted future cash flows attributable to the Baltic Lion and Baltic Tiger would not exceed the carrying value of the respective vessels, the Company reduced the carrying value of each vessel to its estimated fair value, which was determined primarily based on appraisals and third party broker quotes. This resulted in an impairment loss of $35,396 during the year ended December 31, 2015. On April 8, 2015, the Baltic Lion and Baltic Tiger entities were sold to GS&T.   Refer to Note 1 — General Information for details pertaining to the sale of these entities.

 

(Gain) loss on disposal of vessels

 

During the years ended December 31, 2017, 2016 and 2015, the Company recorded net gains of $7,712 and $3,555 and a net loss of $1,210, respectively, related to the sale of vessels.  The $7,712 net gain recognized during the year ended December 31, 2017 related primarily to the sale of the Genco Wisdom, the Genco Reliance, the Genco Carrier, the Genco Success and the Genco Prosperity.  During the year ended December 31, 2016, the Company recorded a net gain of $3,555 related to the sale of the Genco Marine, the Genco Sugar,  the Genco Pioneer,  the Genco Leader and the Genco Acheron.  Lastly, during the year ended December 31, 2015, the Company recorded a net loss of $1,210 related to the sale of the Baltic Lion and Baltic Tiger entities to GS&T from Baltic Trading on April 8, 2015.

 

Deferred financing costs

 

Deferred financing costs, which are presented as a direct deduction within the outstanding debt balance in the Company’s Consolidated Balance Sheet, consist of fees, commissions and legal expenses associated with securing loan facilities and other debt offerings and amending existing loan facilities.  These costs are amortized over the life of the related debt and are included in Interest expense on the Consoliated Statement of Operations.

 

Cash and cash equivalents

 

The Company considers highly liquid investments such as money market funds and certificates of deposit with an original maturity of three months or less to be cash equivalents.

 

Restricted Cash

 

Current and non-current restricted cash includes cash that is restricted pursuant to our credit facilities, refer to Note 8 — Debt.  The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts shown in the Consolidated Statements of Cash Flows:

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 

 

December 31, 

 

December 31, 

 

 

    

2017

    

2016

 

2015

 

Cash and cash equivalents

 

$

174,479

 

$

133,400

 

$

121,074

 

Restricted cash - current

 

 

7,234

 

 

8,242

 

 

19,500

 

Restricted cash - noncurrent

 

 

23,233

 

 

27,426

 

 

315

 

 

 

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

204,946

 

$

169,068

 

$

140,889

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

The Company previously held an investment in the capital stock of Jinhui Shipping and Transportation Limited (“Jinhui”) and in Korea Line Corporation (“KLC”).  Jinhui is a drybulk shipping owner and operator focused on the Supramax segment of drybulk shipping.  KLC is a marine transportation service company which operates a fleet of carriers which includes carriers for iron ore, liquefied natural gas and tankers for oil and petroleum products.  The investments in Jinhui and KLC were designated as Available For Sale (“AFS”) and were reported at fair value, with unrealized gains and losses recorded in equity as a component of accumulated other comprehensive income (loss) (“AOCI”).  The Company classified the investments as current or noncurrent assets based on the Company’s intent to hold the investments at each reporting date.  As of December 31, 2016 and 2017, the Company no longer held investments in Jinhui or KLC.  Refer to Note 5 — Investments.

 

Investments were reviewed quarterly to identify possible other-than-temporary impairment in accordance with ASC Subtopic 320-10, “Investments — Debt and Equity Securities” (“ASC 320-10”).  When evaluating its investments, the Company reviewed factors such as the length of time and extent to which fair value has been below the cost basis, the financial condition of the issuer, the underlying net asset value of the issuers assets and liabilities, and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in market value.  Should the decline in the value of any investment be deemed to be other-than-temporary, the investment basis would be written down to fair market value, and the write-down would be recorded to earnings as a loss.  Refer to Note 5 — Investments.

 

United States Gross Transportation Tax

 

Pursuant to Section 883 of the U.S. Internal Revenue Code of 1986 (as amended) (the “Code”), qualified income derived from the international operations of ships is excluded from gross income and exempt from U.S. federal income tax if a company engaged in the international operation of ships meets certain requirements (the “Section 883 exemption”).  Among other things, in order to qualify, the Company must be incorporated in a country that grants an equivalent exemption to U.S. corporations and must satisfy certain qualified ownership requirements.

 

The Company is incorporated in the Marshall Islands.  Pursuant to the income tax laws of the Marshall Islands, the Company is not subject to Marshall Islands income tax.  The Marshall Islands has been officially recognized by the Internal Revenue Service as a qualified foreign country that currently grants the requisite equivalent exemption from tax.  The Company is not taxable in any other jurisdiction, with the exception of Genco Management (USA) Limited and Genco Shipping Pte. Ltd., as noted in the “Income taxes” section below.

 

The Company will qualify for the Section 883 exemption if, among other things, (i) the Company’s stock is treated as primarily and regularly traded on an established securities market in the United States (the “publicly traded test”) or (ii) the Company satisfies the qualified shareholder test or (iii) the Company satisfies the controlled foreign corporation test (the “CFC test”).  Under applicable Treasury Regulations, the publicly-traded test cannot be satisfied in any taxable year in which persons who actually or constructively own 5% or more of the Company’s stock (which the Company sometimes refers to as “5% shareholders”), together own 50% or more of the Company’s stock (by vote and value) for more than half the days in such year (which the Company sometimes refers to as the “five percent override rule”), unless an exception applies.  A foreign corporation satisfies the qualified shareholder test if more than 50 percent of the value of its outstanding shares is owned (or treated as owned by applying certain attribution rules) for at least half of the number of days in the foreign corporation's taxable year by one or more “qualified shareholders.”  A qualified shareholder includes a foreign corporation that, among other things, satisfies the publicly traded test.  A foreign corporation satisfies the CFC test if it is a “controlled foreign corporation” and one or more qualified U.S. persons own more than 50 percent of the total value of all the outstanding stock.

 

Based on the ownership and trading of the Company’s stock in 2017, the Company believes that it did not satisfy the publicly traded test, the qualified shareholder test or the CFC test, and therefore did not qualify for the Section 883 exemption in 2017.  However, the Company believes that it qualified for exemption from income tax on income derived from the international operations of ships during the years ended December 31, 2016 and 2015 (excluding Baltic Trading in 2015).  In order to meet the publicly traded requirement, the Company’s stock must be treated as being primarily and regularly traded for more than half the days of any such year.  Under the Section 883 regulations, the Company’s qualification for the publicly traded requirement may be jeopardized if 5% shareholders own, in the aggregate, 50% or more of the Company’s common stock for more than half the days of the year.  Management believes that during the year ended December 31, 2017, the combined ownership of its 5% shareholders equaled 50% or more of its common stock for more than half the days of each of those respective years, as applicable. However, during the years ended December 31, 2016 and 2015, management believes that the combined ownership of its 5% shareholders did not equal 50% or more of its common stock for more than half the days of each of those respective years. 

 

If the Company does not qualify for the Section 883 exemption, the Company’s U.S. source shipping income, i.e., 50% of its gross shipping income attributable to transportation beginning or ending in the U.S. (but not both beginning and ending in the U.S.) is subject to a 4% tax without allowance for deductions (the “U.S. gross transportation tax”).

 

During the year ended December 31, 2017, the Company recorded estimated U.S. gross transportation tax of $365 which has been recorded in Voyages expenses in the Consolidated Statements of Operation.  During the years ended December 31, 2016 and 2015, the Company (except Baltic Trading in 2015) qualified for Section 883 exemption and, therefore, did not record any U.S. gross transportation tax. 

 

Prior to the Merger, Baltic Trading was also incorporated in the Marshall Islands, and its stock was primarily traded on an established securities market in the U.S.  However, GS&T indirectly owned shares of Baltic Trading’s Class B Stock which provided GS&T with over 50% of the combined voting power of all classes of Baltic Trading’s voting stock since Baltic Trading’s IPO was completed on March 15, 2010 until the Merger with Baltic Trading on July 17, 2015 (pursuant to which GS&T exchanged its shares for Baltic Trading’s outstanding common stock).  As a result, Baltic Trading’s Class B Stock was not treated as regularly traded (a corporation’s stock is not regularly traded if, amongst other things, 50% or more of its stock (by vote or value) is not listed on one or more established securities markets) and Baltic Trading did not satisfy the publicly traded test in 2015 (and could not satisfy the qualified shareholder test or the controlled foreign corporation test in 2015).  Thus, Baltic Trading did not qualify for a Section 883 exemption in 2015. As such, Baltic Trading was subject to U.S. gross transportation income tax on its U.S. source shipping income. 

 

During the year ended December 31, 2015, Baltic Trading’s recorded estimated U.S. gross transportation tax expense of $68. 

 

Income taxes

 

To the extent the Company’s U.S. source shipping income, or other U.S. source income, is considered to be effectively connected income, as described below, any such income, net of applicable deductions, would be subject to the U.S. federal corporate income tax, currently imposed at a 21% rate effective 2018. In addition, the Company may be subject to a 30% "branch profits" tax on such income, and on certain interest paid or deemed paid attributable to the conduct of such trade or business. Shipping income is generally sourced 100% to the United States if attributable to transportation exclusively between United States ports (the Company is prohibited from conducting such voyages), 50% to the United States if attributable to transportation that begins or ends, but does not both begin and end, in the United States (as described in “United States Gross Transportation Tax” above) and otherwise 0% to the United States.

 

The Company’s U.S. source shipping income would be considered effectively connected income only if:

 

·

the Company has, or is considered to have, a fixed place of business in the U.S. involved in the earning of U.S. source shipping income; and

 

·

substantially all of the Company’s U.S. source shipping income is attributable to regularly scheduled transportation, such as the operation of a vessel that follows a published schedule with repeated sailings at regular intervals between the same points for voyages that begin or end in the U.S.

 

The Company does not intend to have, or permit circumstances that would result in having, any vessel sailing to

or from the U.S. on a regularly scheduled basis. Based on the current shipping operations of the Company and the

Company’s expected future shipping operations and other activities, the Company believes that none of its U.S. source

shipping income will constitute effectively connected income. However, the Company may from time to time generate

non-shipping income that may be treated as effectively connected income.

 

In addition to the Company’s shipping income and pursuant to certain agreements, the Company technically and commercially managed vessels for Baltic Trading until the Merger and provided technical management of vessels for MEP in exchange for specified fees for these services provided.  These services were performed by Genco Management (USA) Limited (“Genco (USA)”), which elected to be taxed as a corporation for United States federal income tax purposes.  As such, Genco (USA) was subject to United States federal income tax (imposed at rates of 21% rate effective 2018) on its worldwide net income, including the net income derived from providing these services.  Genco (USA) has entered into a cost-sharing agreement with the Company and Genco Ship Management LLC, collectively “Manco,” pursuant to which Genco (USA) agrees to reimburse Manco for the costs incurred by Genco (USA) for the use of Manco’s personnel and services in connection with the provision of management services for both Baltic Trading and MEP’s vessels.

 

There was no revenue earned by the Company for these services during the year ended December 31, 2017.  Total revenue earned by the Company for these services during the years ended December 31, 2016 and 2015 was $2,340 and $6,410,  respectively, of which $0 and $3,235,  respectively, eliminated upon consolidation. After allocation of certain expenses, there was taxable net income of $1,502 associated with these activities for the year ended December 31, 2016.  This resulted in estimated U.S. federal net income tax expense of $709.  After allocation of certain expenses, there was taxable net income of $3,880 associated with these activities for the year ended December 31, 2015. This resulted in estimated U.S. federal net income tax expense of $1,753 for the year ended December 31, 2015. 

 

During 2017, the Company established Genco Shipping Pte. Ltd. which is based in Singapore which will be subject to income tax in Singapore.  During the year ended December 31, 2017, there was no income tax recorded by Genco Shipping Pte. Ltd.

 

Deferred revenue

 

Deferred revenue primarily relates to cash received from charterers prior to it being earned.  These amounts are recognized as income when earned.  Additionally, deferred revenue includes estimated customer claims mainly due to time charter performance issues.  Refer to “Revenue and voyage expense recognition” above for description of the Company’s revenue recognition policy.

 

Comprehensive income

 

The Company follows ASC Subtopic 220-10, “Comprehensive Income” (“ASC 220-10”), which establishes standards for reporting and displaying comprehensive income and its components in financial statements.  Comprehensive income is comprised of net income and amounts related to unrealized gains or losses associated with the Company’s AFS investments.

 

Nonvested stock awards

 

The Company follows ASC Subtopic 718-10, “Compensation — Stock Compensation” (“ASC 718-10”), for nonvested stock issued under its equity incentive plans.  Stock-based compensation costs from nonvested stock have been classified as a component of additional paid-in capital on the Consolidated Statement of Equity.

 

Accounting estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Significant estimates include vessel valuations, the valuation of amounts due from charterers, performance claims, residual value of vessels, useful life of vessels and the fair value of derivative instruments, if any.  Actual results could differ from those estimates.

 

Concentration of credit risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk are amounts due from charterers and cash and cash equivalents.  With respect to amounts due from charterers, the Company attempts to limit its credit risk by performing ongoing credit evaluations and, when deemed necessary, requires letters of credit, guarantees or collateral.  The Company earned 100% of voyage revenues from 102,  52 and 52 customers during the years ended December 31, 2017, 2016 and 2015. 

 

For the year ended December 31, 2017, there were two customers that individually accounted for more than 10% of voyage revenues: Swissmarine Services S.A., including its subsidiaries (“Swissmarine”) and Clipper Group, including Clipper Bulk Shipping, the Clipper Logger Pool and the Clipper Sapphire Pool (“Clipper”), which represented 15.09% and 10.98% of voyage revenues, respectively. For the year ended December 31, 2016, there were three customers that individually accounted for more than 10% of voyage revenues; Swissmarine, Clipper, and Pioneer Navigation Ltd., which represented 25.31%,  22.96% and 11.11% of voyage revenues, respectively.  For the year ended December 31, 2015, there were three customers that individually accounted for more than 10% of voyage revenues; Swissmarine, Clipper, and Pioneer Navigation Ltd., which represented 24.37%,  19.09% and 13.03% of voyage revenues, respectively. 

 

At December 31, 2017 and 2016, the Company maintains all of its cash and cash equivalents with three and four financial institutions, respectively.  None of the Company’s cash and cash equivalent balance is covered by insurance in the event of default by these financial institutions.

 

Fair value of financial instruments

 

The estimated fair values of the Company’s financial instruments, such as amounts due to / due from charterers, accounts payable and long-term debt, approximate their individual carrying amounts as of December 31, 2017 and 2016 due to their short-term maturity or the variable-rate nature of the respective borrowings under the credit facilities.  See Note 10 — Fair Value of Financial Instruments for additional disclosure on the fair value of long-term debt.

 

Recent accounting pronouncements

 

In May 2017, the FASB issued Accounting Standards Update (“ASU”) No. 2017-09, “Compensation – Stock Compensation (Topic 718), Scope of Modification Account” (“ASU 2017-09”).  This ASU provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification account.  This ASU is effective for fiscal years beginning after December 15, 2017, and for interim periods within those years and early adoption is permitted.  ASU 2017-09 must be applied prospectively to an award modified on or after the adoption date.  The Company will adopt ASU 2017-09 during the first quarter of 2018.

 

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”).  This ASU adds or clarifies the guidance in ASC 230 – Statement of Cash Flows regarding the classification and presentation of restricted cash in the statement of cash flows.  ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flow.  Changes in the deposits of restricted cash were previously included in the investing activities section in the Consolidated Statements of Cash Flows. This ASU is effective for fiscal years beginning after December 15, 2017, and for interim periods within those years and early adoption is permitted.  ASU 2016-18 must be adopted retrospectively.  The Company early adopted ASU 2016-18 during the fourth quarter of 2017. The retrospective application of ASU 2016-18 resulted in restricted cash being reclassified as a component of cash, cash equivalents and restricted cash in the Consolidated Statements of Cash Flows.

 

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230):  Classification of Certain Cash Receipts and Cash Payments.”  This ASU adds or clarifies the guidance in ASC 230 – Statement of Cash Flows regarding the classification of certain cash receipts and payments in the statement of cash flows.  This ASU is effective for fiscal years beginning after December 15, 2017, and for interim periods within those years and early adoption is permitted.  This ASU shall be applied retrospectively to all periods presented, but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable. Other than presentation, the Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which replaces the existing guidance in ASC 840 – Leases.  This ASU requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases.  Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability for leases with lease terms of more than twelve months. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset and for operating leases, the lessee would recognize a straight-line total lease expense. Accounting by lessors will remain largely unchanged from current U.S. GAAP.  The requirements of this standard include an increase in required disclosures.  This ASU is effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years.  Lessees and lessors will be required to apply the new standard at the beginning of the earliest period presented in the financial statements in which they first apply the new guidance, using a modified retrospective transition method. The requirements of this standard include a significant increase in required disclosures. The Company is currently evaluating the impact of this adoption on its consolidated financial statements and related disclosures.  

 

In January 2016, the FASB issued ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). This ASU will require that equity investments are measured at fair value with changes in fair value recognized in net income (loss). ASU 2016-01 will be effective for annual periods beginning after December 15, 2017, and interim periods within those years. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements as the Company currently does not have any equity investments.

 

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle is that a company should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, and shall be applied either retrospectively to each period presented or as a cumulative effect adjustment as of the date of adoption. In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers - Narrow Scope Improvements and Practical Expedients.”  This update provides further guidance on applying collectability criterion to assess whether the contract is valid and represents a substantive transaction on the basis whether a customer has the ability and intention to pay the promised consideration.  The requirements of this standard include an increase in required disclosures. Additionally, During November 2017, the FASB issued ASU No. 2017-14 which provides amendments to certain Securities and Exchange Commission paragraphs within the FASB’s ASC. Management is currently analyzing contracts with our customers covering the significant streams of the Company’s annual revenues under the provisions of the new standard as well as change necessary to information technology systems, processes and internal controls to capture new data and address changes in financial reporting.  The Company intends to adopt the aforementioned ASUs for the interim periods after December 31, 2017, using the modified retrospective transition method applied to those contracts which were not completed as of that date. Upon adoption, the Company will recognize the cumulative effect of adopting this guidance as an adjustment to its opening balance of retained earnings as of January 1, 2018. Prior periods will not be retrospectively adjusted. While the assessment is still ongoing, based on the progress made to date, the Company expects that the timing of recognition of revenue for certain ongoing charter contracts will be impacted as well as the timing of recognition of certain voyage related costs.  While the assessment of certain effects of the adoption of ASU 2014-09 are still ongoing as noted below, the timing of revenue recognition will primarily affect spot market voyage charters.  Under ASU 2014-09,  revenue will be recognized beginning from when the vessel arrives at the load port rather than from the latter of the time when the vessel departs from its last discharge port and when the contract is entered into with the charterer. The Company expects that the adoption of ASU 2014-09 will result in an increase in the opening Retained deficit balance as of January 1, 2018 in the Consolidated Balance Sheet of approximately $1,100 to $1,200 as a result of the adjustment of Voyage revenue.  The Company is currently evaluating the effect of the adjustment of any expenses and the additional presentation and disclosure requirements of ASU 2014-09 on our consolidated financial statements. 

 

CASH FLOW INFORMATION
CASH FLOW INFORMATION

3 - CASH FLOW INFORMATION

 

For the year ended December 31, 2017, the Company had non-cash investing activities not included in the Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $36 for the Purchase of other fixed assets.

 

Professional fees and trustee fees in the amount of $0 were recognized by the Company in Reorganization items, net for the year ended December 31, 2017 (refer to Note 15).  During this period, $25 of professional fees and trustee fees were paid through December 31, 2017 and $0 is included in Accounts payable and accrued expenses as of December 31, 2017.

 

For the year ended December 31, 2016, the Company had non-cash investing activities not included in the Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $35 for the Purchase of vessels, including deposits, $20 for the Purchase of other fixed assets and $27 for the Net proceeds from sale of vessels.  Additionally, for the year ended December 31, 2016, the Company had non-cash financing activities not included in the Consolidated Statement of Cash Flows for items included Accounts payable and accrued expenses consisting of $1,103 associated with the Payment of Series A Preferred Stock issuance costs.

 

Professional fees and trustee fees in the amount of $272 were recognized by the Company in Reorganization items, net for the year ended December 31, 2016 (refer to Note 15).  During this period, $294 of professional fees and trustee fees were paid through December 31, 2016 and $25 is included in Accounts payable and accrued expenses as of December 31, 2016.

 

For the year ended December 31, 2015, the Company had non-cash investing activities not included in the Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $236 for the Purchase of vessels, including deposits and $121 for the Purchase of other fixed assets.  Additionally, for the year ended December 31, 2015, the Company had non-cash financing activities not included in the Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $101 associated with the Cash settlement of non-accredited Note holders.  During the year ended December 31, 2015, the Company increased the amount of non-accredited holders of the Convertible Senior Notes, which were discharged on July 9, 2014 when the Company subsequently emerged from bankruptcy  (the “Effective Date”), which were settled in cash versus settled with common shares.  Lastly, for the year ended December 31, 2015, the Company had non-cash investing activities not included in the Consolidated Statement of Cash Flows for items included in Prepaid expenses and other current assets consisting of ($14) associated with the Purchase of vessels, including deposits and $148 associated with the Sale of AFS Securities.

 

Professional fees and trustee fees in the amount of $1,085 were recognized by the Company in Reorganization items, net for the year ended December 31, 2015 (refer to Note 15).  During this period, $1,351 of professional fees and trustee fees were paid through December 31, 2015 and $48 is included in Accounts payable and accrued expenses as of December 31, 2015.

 

During the year ended December 31, 2016, the Company made a reclassification of $4,840 from Vessels, net of accumulated depreciation to Vessels held for sale due to the approval by the Board of Directors to sell the Genco Success, Genco Wisdom and Genco Prosperity prior to December 31, 2016.  Refer to Note 4 — Vessel Acquisitions and Dispositions.

 

During the year ended December 31, 2015, the Company made a reclassification of $25,593 from Deposits on vessels to Vessels, net of accumulated depreciation, due to the completion of the purchase of the Baltic Wasp, Baltic Scorpion and Baltic Mantis.  No such reclassifications were made by the Company during the year ended December 31, 2017 or 2016.

 

During the years ended December 31, 2017, 2016 and 2015, cash paid for interest, net of amounts capitalized, was $25,098,  $25,619 and $16,548, respectively.

 

During the years ended December 31, 2017, 2016 and 2015, cash paid for estimated income taxes was $0,  $703 and $2,085, respectively.

 

On May 17, 2017, the Company issued 25,197 restricted stock units to certain members of the Board of Directors.  The aggregate fair value of these restricted stock units was $255. 

 

On March 23, 2017, the Company issued 292,398 restricted stock units and options to purchase 133,000 shares with an exercise price of $11.13 per share to John C. Wobensmith, Chief Executive Officer and President.  The fair value of these restricted stock units and stock options were $3,254 and $853, respectively.

 

On May 18, 2016, the Company issued 66,666 restricted stock units to certain members of the Board of Directors.  These restricted stock units vested on May 17, 2017.  The aggregate fair value of these restricted stock units was $340.   

 

On February 17, 2016, the Company granted 40,816 and 20,408 shares of nonvested stock under the 2015 Equity Incentive Plan to Peter C. Georgiopoulos, former Chairman of the Board of Directors, and John C. Wobensmith,  respectively.  The grant date fair value of such nonvested stock was $318.  

 

On July 13, 2015 and July 29, 2015, the Company issued 1,619 and 5,821 restricted stock units to certain members of the Board of Directors.  The aggregate fair value of these restricted stock units was $113 and $416, respectively, and 1,619,  2,328 and 3,493 restricted stock units vested on July 17, 2015, February 17, 2016 and May 18, 2016, respectively. 

 

Refer to Note 18 — Stock-Based Compensation for further information regarding the aforementioned grants.

VESSEL ACQUISITIONS AND DISPOSITIONS
VESSEL ACQUISITIONS AND DISPOSITIONS

4 - VESSEL ACQUISITIONS AND DISPOSITIONS

 

During December 2016, the Board of Directors unanimously approved the sale of the Genco Success, Genco Prosperity and Genco Wisdom and these vessel assets have been classified as held for sale in the Consolidated Balance Sheet as of December 31, 2016.  These vessels were sold during the year ended December 31, 2017, as described below.

 

On December 19, 2016, the Board of Directors unanimously approved selling the Genco Prosperity, a 1997-built Handymax vessel, and on December 21, 2016, the Company reached an agreement to sell the Genco Prosperity to a third party for $3,050 less a 3.5% broker commission payable to a third party.  The sale was completed on May 16, 2017.

 

On December 5, 2016, the Board of Directors unanimously approved selling the Genco Success, a 1997-built Handymax vessel, and on December 15, 2016, the Company reached an agreement to sell the Genco Success to a third party for $2,800 less a 3.0% broker commission payable to a third party.  The sale was completed on March 19, 2017. 

 

During January 2017, the Board of Directors unanimously approved selling the Genco Carrier, a 1998-built Handymax vessel, and on January 25, 2017, the Company reached an agreement to sell the Genco Carrier to a third party for $3,560 less a $92 broker commission payable to a third party.  The sale was completed on February 16, 2017. 

 

During January 2017, the Board of Directors unanimously approved selling the Genco Reliance, a 1999-built Handysize vessel, and on January 12, 2017, the Company reached an agreement to sell the Genco Reliance to a third party for $3,500 less a 3.5% broker commission payable to a third party.  The sale was completed on February 9, 2017.

 

On December 19, 2016, the Board of Directors unanimously approved selling the Genco Wisdom, a 1997-built Handymax vessel. On December 21, 2016, the Company reached an agreement to sell the Genco Wisdom to a third party for $3,250 less a 3.5% broker commission payable to a third party.  The sale was completed on January 9, 2017.

 

On November 7, 2016, the Board of Directors unanimously approved selling the Genco Acheron, a 1999-built Panamax vessel, and on November 14, 2016, the Company reached an agreement to sell the Genco Acheron to a third party for $3,480 less a 5.5% broker commission payable to a third party.  The sale was completed on December 12, 2016.

 

On October 24, 2016, the Board of Directors unanimously approved selling the Genco Leader, a 1999-built Panamax vessel, and on October 25, 2016, the Company reached an agreement to sell the Genco Leader to a third party for $3,470 less a 3.0% broker commission payable to a third party.  The sale was completed on November 4, 2016.  On November 4, 2016, the Company utilized the net proceeds from the sale to pay down $3,366 on the $148 Million Credit Facility as the Genco Leader was a collateralized vessel under this facility prior to the refinancing of the $148 Million Credit Facility with the $400 Million Credit Facility, refer to Note 8 — Debt.

 

On September 30, 2016, the Board of Directors unanimously approved selling the Genco Pioneer, a 1999-built Handysize vessel, and on October 8, 2016, the Company reached an agreement to sell the Genco Pioneer to a third party for $2,650 less a 5.5% broker commission payable to a third party.  The sale was completed on October 26, 2016.  On October 26, 2016 the Company utilized the net proceeds from the sale to pay down $2,504 on the $148 Million Credit Facility as the Genco Pioneer was a collateralized vessel under this facility prior to the refinancing of the $148 Million Credit Facility with the $400 Million Credit Facility, refer to Note 8 — Debt.

 

On September 30, 2016, the Board of Directors unanimously approved selling the Genco Sugar, a 1998-built Handysize vessel, and on October 10, 2016, the Company reached an agreement to sell the Genco Sugar to a third party for $2,450 less a 5.5% broker commission payable to a third party.  The sale was completed on October 20, 2016.  On October 21, 2016, the Company utilized the net proceeds from the sale to pay down $2,315 on the $100 Million Term Loan Facility as the Genco Sugar was a collateralized vessel under this facility prior to the refinancing of the $100 Million Term Loan Facility with the $400 Million Credit Facility, refer to Note 8 — Debt.

 

On April 5, 2016, the Board of Directors unanimously approved scrapping the Genco Marine. The Company reached an agreement on May 6, 2016 to sell the Genco Marine, a 1996-built Handymax vessel, to be scrapped with Ace Exim Pte Ltd., a demolition yard, for a net amount $2,187 less a 2.0% broker commission payable to a third party. On May 17, 2016, the Company completed the sale of the Genco Marine. 

 

On November 13, 2013, Baltic Trading entered into agreements to purchase up to four 64,000 dwt Ultramax newbuilding drybulk vessels from Yangfan Group Co., Ltd. for a purchase price of $28,000 per vessel, or up to $112,000 in the aggregate.  Baltic Trading agreed to purchase two such vessels, which have been renamed the Baltic Hornet and Baltic Wasp, and obtained an option to purchase up to two additional such vessels for the same purchase price, which Baltic Trading exercised on January 8, 2014. These vessels were renamed the Baltic Mantis and the Baltic Scorpion. The first of these vessels, the Baltic Hornet, was delivered to Baltic Trading on October 29, 2014. The Baltic Wasp was delivered to Baltic Trading on January 2, 2015. The Baltic Scorpion and the Baltic Mantis were delivered to the Company on August 6, 2015 and October 9, 2015, respectively. The Company used a combination of cash on hand, cash flow from operations as well as debt, including the $148 Million Credit Facility and the 2014 Term Loan Facilities as described in Note 8 — Debt, to fully finance the acquisition of these Ultramax newbuilding drybulk vessels. On December 30, 2014, Baltic Trading paid $19,645 for the final payment due for the Baltic Wasp, which was classified as noncurrent Restricted Cash in the Consolidated Balance Sheets as of December 31, 2014 as the payment was held in an escrow account and not released to the seller until the vessel was delivered to Baltic Trading on January 2, 2015.

 

Refer to Note 1 — General Information for a listing of the delivery dates for the vessels in the Company’s fleet.

 

Capitalized interest expense associated with the newbuilding contracts entered into by Baltic Trading as recorded by the Company for the years ended December 31, 2017, 2016 and 2015 was $0,  $0 and $372, respectively.

INVESTMENTS
INVESTMENTS

5 - INVESTMENTS

 

The Company held an investment in the capital stock of Jinhui and the stock of KLC.  Jinhui is a drybulk shipping owner and operator focused on the Supramax segment of drybulk shipping.  KLC is a marine transportation service company which operates a fleet of carriers which includes carriers for iron ore, liquefied natural gas and tankers for oil and petroleum products.  These investments were designated as AFS and were reported at fair value, with unrealized gains and losses recorded in equity as a component of AOCI.  At December 31, 2017 and 2016, the Company did not hold any shares of Jinhui capital stock or shares of KLC stock. 

 

Prior to the sale of its remaining shares of Jinhui capital stock, the Company reviewed the investment in Jinhui for indicators of other-than-temporary impairment in accordance with ASC 320-10.  Based on the Company’s review, it had deemed the investment in Jinhui to be other-than-temporarily impaired as of June 30, 2016, December 31, 2015 and September 30, 2015 due to the duration and severity of the decline in its market value versus its cost basis and the absence of the intent and ability to recover the initial carrying value of the investment.  As a result, the Company recorded an impairment charge in the Consolidated Statements of Operations of $2,696 and $37,877 during the years ended December 31, 2016 and 2015, respectively.  The Company reviewed its investments in Jinhui and KLC for impairment on a quarterly basis.  The Company’s investment in Jinhui was a Level 1 item under the fair value hierarchy, refer to Note 10 — Fair Value of Financial Instruments.

 

The unrealized gains (losses) on the Jinhui capital stock and KLC stock were a component of AOCI since these investments were designated as AFS securities. If the investment in Jinhui was deemed other-than-temporarily impaired, the cost basis for the investment would be revised to its fair value on that date.

 

Refer to Note 9 — Accumulated Other Comprehensive Income (Loss) for a breakdown of the components of AOCI during the years ended December 31, 2016 and 2015, including the effects of the sale of Jinhui and KLC shares and other-than-temporary impairment of the investment in Jinhui.

NET LOSS PER SHARE
NET LOSS PER SHARE

6 - NET LOSS PER SHARE

 

The computation of basic net loss per share is based on the weighted-average number of common shares outstanding during the reporting period. The computation of diluted net loss per share assumes the vesting of nonvested stock awards and the exercise of stock options (refer to Note 18 — Stock-Based Compensation), for which the assumed proceeds upon vesting are deemed to be the amount of compensation cost attributable to future services and are not yet recognized using the treasury stock method, to the extent dilutive.  Of the 226,931 and 89,526 nonvested shares outstanding, including RSUs, and the 133,000 and 0 stock options outstanding at December 31, 2017 and 2016, respectively, (refer to Note 18 — Stock-Based Compensation), all are anti-dilutive. The Company’s diluted net loss per share will also reflect the assumed conversion of equity warrants issued on the Effective Date and MIP Warrants issued by the Company (refer to Note 18 — Stock-Based Compensation) if the impact is dilutive under the treasury stock method.  Of the 0 and 713,122 of unvested MIP Warrants outstanding at December 31, 2017 and 2016, respectively, and 3,936,761 Equity Warrants outstanding at December 31, 2017 and 2016, all are anti-dilutive.  The Company’s diluted net loss per share will also reflect the assumed conversion of the shares of Series A Preferred Stock (refer to Note 1 — General Information) if the impact is dilutive.  Of the 27,061,856 shares of Series A Preferred Stock outstanding at December 31, 2016, all are anti-dilutive. 

 

 

The components of the denominator for the calculation of basic and diluted net loss per share are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Years Ended December 31,

 

 

 

 

2017

    

2016

  

2015

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding, basic:

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic 

 

34,242,631

 

7,251,231

 

6,583,163

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding, diluted:

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic 

 

34,242,631

 

7,251,231

 

6,583,163

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of Series A Preferred Stock

 

 —

 

 —

 

 —

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of warrants 

 

 —

 

 —

 

 —

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of stock options

 

 —

 

 —

 

 —

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of restricted stock awards 

 

 —

 

 —

 

 —

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, diluted 

 

34,242,631

 

7,251,231

 

6,583,163

 

 

 

RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS

7 - RELATED PARTY TRANSACTIONS

 

On October 13, 2016, Peter C. Georgiopoulos resigned as Chairman of the Board and a Director of the Company, refer to Note 1 — General Information. During the year ended December 31, 2017, the Company did not identify any related party transactions.  The following represent related party transactions reflected in these consolidated financial statements during the years ended December 31, 2016 and 2015:

 

The Company incurred travel and other office related expenditures from Gener8 Maritime, Inc. (“Gener8”), where the Company’s former Chairman, Peter C. Georgiopoulos, serves as Chairman of the Board.  For the years ended December 31, 2016 and 2015, the Company incurred travel and other office related expenditures totaling $73 and $111, respectively, reimbursable to Gener8 or its service provider. At December 31, 2016, the amount due to Gener8 from the Company was $0.

 

During the years ended December 31, 2016 and 2015, the Company incurred legal services (primarily in connection with vessel acquisitions) aggregating $0 and $18, respectively, from Constantine Georgiopoulos, the father of Peter C. Georgiopoulos. At December 31, 2017 and 2016, the amount due to Constantine Georgiopoulos was $0 and $10, respectively.

 

The Company has entered into agreements with Aegean Marine Petroleum Network, Inc. (“Aegean”) to purchase lubricating oils for certain vessels in its fleet.  Peter C. Georgiopoulos was formerly the Chairman of the Board of Aegean.  During the years ended December 31, 2016 and 2015, Aegean supplied lubricating oils and bunkers to the Company’s vessels aggregating $1,188 and $1,725, respectively. At December 31, 2016, $0 remained outstanding.

 

During the years ended December 31, 2016 and 2015, the Company invoiced MEP for technical services provided, including termination fees, and expenses paid on MEP’s behalf aggregating $2,325 and $3,233,  respectively. Peter C. Georgiopoulos was a director of and had a minority interest in MEP.  At December 31, 2016, $0 was due to the Company from MEP.  Total service revenue earned by the Company, including termination fees, for technical service provided to MEP for the years ended December 31, 2016 and 2015 was $2,340 and $3,175,  respectively.

DEBT
DEBT

8 - DEBT

 

Long-term debt consists of the following:

 

 

 

 

 

 

 

 

 

 

 

December 31, 

 

December 31, 

 

 

    

2017

    

2016

 

Principal amount 

 

$

519,083

 

$

523,577

 

PIK interest

 

 

5,341

 

 

800

 

Less:  Unamortized debt financing costs 

 

 

(9,032)

 

 

(11,357)

 

Less: Current portion 

 

 

(24,497)

 

 

(4,576)

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

$

490,895

 

$

508,444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

December 31, 2016

 

 

 

 

 

Unamortized

 

 

 

Unamortized

 

 

 

 

 

Debt Financing

 

 

 

Debt Financing

 

 

 

Principal

 

Cost

 

Principal

 

Cost

 

$400 Million Credit Facility

 

$

399,600

 

$

6,332

 

$

400,000

 

$

7,967

 

$98 Million Credit Facility

 

 

93,939

 

 

1,370

 

 

95,271

 

 

1,868

 

2014 Term Loan Facilities

 

 

25,544

 

 

1,330

 

 

28,306

 

 

1,522

 

PIK interest

 

 

5,341

 

 

 —

 

 

800

 

 

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total debt

 

$

524,424

 

$

9,032

 

$

524,377

 

$

11,357

 

 

As of December 31, 2017 and 2016, $9,032 and $11,357 of deferred financing costs, respectively, were presented as a direct deduction within the outstanding debt balance in the Company’s Consolidated Balance Sheet.  Amortization expense for deferred financing costs for the years ended December 31, 2017, 2016 and 2015 was $2,325,  $2,847 and $2,379, respectively.  This amortization expense is recorded as a component of Interest expense in the Consolidated Statements of Operations.

 

Effective November 15, 2016, the unamortized deferred financing costs for the Prior Facilities that were refinanced with the $400 Million Credit Facility were amortized over the life of the $400 Million Credit Facility.

 

Commitment Letter

 

On June 8, 2016, the Company entered into a Commitment Letter (the “Commitment Letter”) for a senior secured loan facility (the “$400 Million Credit Facility”) for an aggregate principal amount of up to $400,000 with Nordea Bank Finland plc, New York Branch, Skandinaviska Enskilda Banken AB (publ), DVB Bank SE, ABN AMRO Capital USA LLC, Crédit Agricole Corporate and Investment Bank, Deutsche Bank AG Filiale Deutschlandgeschäft, Crédit Industriel et Commercial, and BNP Paribas.  The $400 Million Credit Facility refinanced the Company’s $100 Million Term Loan Facility, $253 Million Term Loan Facility, $148 Million Credit Facility, $22 Million Term Loan Facility, $44 Million Term Loan Facility and 2015 Revolving Credit Facility, each as defined below (collectively, the “Prior Facilities”) and was finalized on November 10, 2016 (refer to $400 Million Credit Facility section below).  As a condition to the effectiveness of the Commitment Letter, the Company entered into separate equity commitment letters for a portion of such financing on June 8, 2016 with each of the following: (i) funds or related entities managed by Centerbridge Partners, L.P. or its affiliates (“Centerbridge”) for approximately $31,200, (ii) funds or related entities managed by Strategic Value Partners, LLC (“SVP”) for approximately $17,300, and (iii) funds managed by affiliates of Apollo Global Management, LLC (“Apollo”) for approximately $14,000, each of which are subject to a number of conditions.  Additionally, pursuant to the Commitment Letter, the waivers with regard to the collateral maintenance covenants under the $100 Million Term Loan Facility, $253 Million Term Loan Facility, $148 Million Credit Facility, $22 Million Term Loan Facility, $44 Million Term Loan Facility and the 2015 Revolving Credit Facility, as defined below, were initially extended to July 29, 2016 subject to the entry into a definitive purchase agreement for the equity financing referred to above by June 30, 2016.

 

On June 30, 2016 the Company entered into an amendment and restatement of the Commitment Letter (the “Amended Commitment Letter”).  This amendment extended the collateral maintenance waivers under the Prior Facilities through 11:59 p.m. on September 30, 2016, which were further extended to October 7, 2016 pursuant to an additional agreement entered into with the lenders on September 30, 2016.  On October 6, 2016, the collateral maintenance waivers were further extended through November 15, 2016 pursuant to the Second Amended Commitment Letter (as defined below).  Additionally, the Second Amended Commitment Letter (as defined below), as well as the Amended $98 Million Credit Facility Commitment Letter (refer to the “$98 Million Credit Facility” section below) provided for waivers of the Company’s company-wide minimum cash covenants, so long as cash and cash equivalents of the Company are at least $25,000, and of the Company’s maximum leverage ratio through November 15, 2016.  Lastly, the collateral maintenance waivers and maximum leverage ratio waivers under the 2014 Term Loan Facility were extended through November 15, 2016 pursuant to a waiver entered into on October 14, 2016.  In addition, from August 31 through November 15, 2016, the amount of cash the Company would need to maintain under its minimum cash covenants applicable only to obligors in each Prior Facility would be reduced by up to $250 per vessel, subject to an overall maximum cash withdrawal of $10,000 to pay expenses and additional conditions.  The effectiveness of such new waivers and waiver extensions was conditioned on extension of the equity commitment letters entered into on June 8, 2016 as described above through September 30, 2016, which were so extended by amendments entered into on June 29, 2016.   The Amended Commitment Letter also conditioned such waivers on the Company entering into a definitive purchase agreement or file a registration statement for an equity financing by 11:59 p.m. on August 15, 2016.  Pursuant to additional agreements entered into with the lenders on August 12, 2016, August 30, 2016, September 14, 2016 and September 30, 2016, the deadline to enter into a definitive purchase agreement or file a registration statement for an equity financing was further extended to October 7, 2016.  Stock purchase agreements were entered into on October 6, 2016 pursuant to the Second Amended Commitment Letter as defined below.

 

On October 6, 2016, the Company entered into a second amendment and restatement of the Commitment Letter (the “Second Amended Commitment Letter”).  This amendment further extended the collateral maintenance waivers under the Prior Facilities through November 15, 2016. As a condition to the effectiveness of the Second Amended Commitment Letter, the Company entered into stock purchase agreements (the “Purchase Agreements”) effective as of October 4, 2016 with Centerbridge, SVP and Apollo (the “Investors”) for the purchase of the Company’s Series A Preferred Stock for an aggregate of up to $125,000 in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended.  The Series A Preferred Stock sold pursuant to the Purchase Agreements was automatically and mandatorily convertible into the Company’s common stock, par value $0.01 per share, upon approval by the Company’s shareholders of such conversion.  The purchase price of the Series A Preferred Stock under each of the Purchase Agreements was $4.85 per share.  An additional 1,288,660 shares of Series A Preferred Stock were issued to Centerbridge, SVP and Apollo as a commitment fee on a pro rata basis.  The purchase price and the other terms and conditions of the transaction were established in arm’s length negotiations between an independent special committee of the Board of the Directors of the Company (the “Special Committee”).  The Special Committee unanimously approved the transaction.

 

Under the Purchase Agreements, Centerbridge made a firm commitment to purchase 6,597,938 shares of Series A Preferred Stock for an aggregate purchase price of $32,000, SVP made a firm commitment to purchase 7,628,866 shares of Series A Preferred Stock for an aggregate purchase price of $37,000, and Apollo made a firm commitment to purchase 3,587,629 shares of Series A Preferred Stock for an aggregate purchase price of $17,400.  In addition, Centerbridge, SVP and Apollo agreed to provide a backstop commitment to purchase up to 3,402,062,  2,371,134 and 2,185,568 additional shares of Series A Preferred Stock, respectively, for $4.85 per share. 

 

Subsequently, on October 27, 2016, the Company entered into a stock purchase agreement (the “Additional Purchase Agreement”) with certain of the Investors; John C. Wobensmith, the Company’s Chief Executive Officer and President; and other investors for the sale of shares of Series A Preferred Stock for an aggregate purchase price of $38,600 at a purchase price of $4.85 per share.  The purchase price and the other terms and conditions of these transactions were established in arm’s length negotiations between an independent special committee of the board of directors of the Company (the “Special Committee”) and the investors.  The Special Committee unanimously approved the transactions.

 

On November 15, 2016, pursuant to the Purchase Agreements, the Company completed the private placement of 27,061,856 shares of Series A Preferred Stock which included 25,773,196 shares at a price per share of $4.85 and an additional 1,288,660 shares issued as a commitment fee on a pro rate basis as noted above.  These shares were converted to common shares on January 4, 2017.  Refer to Note 1 — General Information. 

 

$400 Million Credit Facility

 

On November 10, 2016, the Company entered into a senior secured term loan facility, the $400 Million Credit Facility, in an aggregate principal amount of up to $400,000 with Nordea Bank Finland plc, New York Branch, Skandinaviska Enskilda Banken AB (publ), DVB Bank SE, ABN AMRO Capital USA LLC, Crédit Agricole Corporate and Investment Bank, Deutsche Bank AG Filiale Deutschlandgeschäft, Crédit Industriel et Commercial and BNP Paribas.  On November 15, 2016, the proceeds under the $400 Million Credit Facility were used to refinance the Prior Facilities (as defined above under “Commitment Letter”).  The $400 Million Credit Facility is collateralized by 45 of the Company’s vessels and at December 31, 2016 required the Company to sell five remaining unencumbered vessels, which were sold during the year ended December 31, 2017.  Refer to Note 4 — Vessel Acquisitions and Dispositions.

 

On November 14, 2016, the Company borrowed the maximum available amount of $400,000.  As of December 31, 2017, there was no availability under the $400 Million Credit Facility.  Total debt repayments of $400,  $0 and $0 were made during the years ended December 31, 2017, 2016 and 2015, respectively.  As of December 31, 2017 and 2016, the total outstanding net debt balance, including PIK interest as defined below, was $398,609 and $392,833, respectively.

 

The $400 Million Credit Facility has a final maturity date of November 15, 2021 and the principal borrowed under the facility will bear interest at the London Interbank Offered Rate (“LIBOR”) for an interest period of three months plus a margin of 3.75%.  The Company has the option to pay 1.50% of such rate in-kind (“PIK interest”) through December 31, 2018, of which will be payable on the maturity date of the facility.  The Company opted to make the PIK interest election through September 29, 2017 and as of December 31, 2017, has recorded $5,341 of PIK interest which has been recorded in Long-term debt in the Consolidated Balance Sheet.  The Company has currently not elected to make the PIK interest election beginning September 30, 2017.  The $400 Million Credit Facility originally had scheduled amortization payments of (i) $100 per quarter through December 31, 2018, (ii) $7,610 per quarter from March 31, 2019 through December 31, 2020, (iii) $18,571 per quarter from March 31, 2021 through September 30, 2021 and (iv) $282,605 upon final maturity on November 15, 2021, which did not include PIK interest.   Pursuant to the credit facility agreement, upon the payment of any excess cash flow to the lenders (see below), the scheduled repayments shall be adjusted to reflect the reduction of future amortization amounts.  The repayment schedule below reflects that adjustment.

 

There is no collateral maintenance testing for the $400 Million Credit Facility prior to June 30, 2018.  Thereafter, there will be required collateral maintenance testing with a gradually increasing threshold calculated as the value of the collateral under the facility as a percentage of the loan outstanding as follows: 105% from June 30, 2018 to December 30, 2018, 115% from December 31, 2018 to December 30, 2020 and 135% thereafter. 

 

The $400 Million Credit Facility requires the Company to comply with a number of covenants substantially similar to those in the Company’s other credit facilities, including financial covenants related to debt to total book capitalization, minimum working capital, minimum liquidity, and dividends; collateral maintenance requirements (as described above); and other customary covenants.  The Company is required to maintain a ratio of total indebtedness to total capitalization of not greater than 0.70 to 1.00 at all times.  Minimum working capital as defined in the $400 Million Credit Facility is not to be less than $0 at all times.  The $400 Million Credit Facility has minimum liquidity requirements at all times for all vessels in its fleet of (i) $250 per vessel to and including December 31, 2018, (ii) $400 per vessel from January 1, 2019 to and including December 31, 2019 and (iii) $700 per vessel from January 1, 2020 and thereafter. The Company is prohibited from paying dividends without lender consent through December 31, 2020.  The Company may establish non-recourse subsidiaries to incur indebtedness or make investments, but it will be restricted from incurring indebtedness or making investments (other than through non-recourse subsidiaries).  Excess cash from the collateralized vessels under the $400 Million Credit Facility are subject to a cash sweep.  The cash flow sweep will be 100% of excess cash flow through December 31, 2018, 75% through December 31, 2020 and the lessor of 50% of excess cash flow or an amount that would reflect a 15-year average vessel age repayment profile thereafter; provided no prepayment under the cash sweep is required from the first $10,000 in aggregate of the prepayments otherwise required under the cash sweep.    As of December 31, 2017, the excess cash flow sweep was $11,334 and this amount will be due to the lender within 45 days of the end of the reporting period.  As such, it has been included in the current portion of outstanding debt for this facility.

 

At December 31, 2017 and 2016, the Company had deposited $11,180 that has been reflected as noncurrent restricted cash which represents restricted pledged liquidity amounts pursuant to the $400 Million Credit Facility. 

 

As of December 31, 2017, the Company believed it was in compliance with all of the financial covenants under the $400 Million Credit Facility.

 

The following table sets forth the scheduled repayment of the outstanding principal debt of $404,941 at December 31, 2017, which includes $5,341 of PIK interest, under the $400 Million Credit Facility:

 

 

 

 

 

 

Year Ending December 31, 

    

Total

 

 

 

 

 

 

2018

 

$

11,734

 

2019

 

 

28,908

 

2020

 

 

28,908

 

2021

 

 

335,391

 

 

 

 

 

 

Total debt

 

$

404,941

 

 

$98 Million Credit Facility

 

On November 4, 2015, thirteen of the Company’s wholly-owned subsidiaries entered into a Facility Agreement, by and among such subsidiaries as borrowers (collectively, the “Borrowers”); Genco Holdings Limited, a newly formed direct subsidiary of Genco of which the Borrowers are direct subsidiaries (“Holdco”); certain funds managed or advised by Hayfin Capital Management, Breakwater Capital Ltd, or their nominee, as lenders; and Hayfin Services LLP, as agent and security agent (the “$98 Million Credit Facility”).

 

The Borrowers borrowed the maximum available amount of $98,271 under the facility on November 10, 2015. As of December 31, 2017, there was no availability under the $98 Million Credit Facility.  Total debt repayments of $1,332,  $3,000 and $0 were made during the years ended December 31, 2017, 2016 and 2015, respectively.  At December 31, 2017 and 2016, the total outstanding net debt balance was $92,569 and $93,403, respectively.

 

Borrowings under the facility are available for working capital purposes.  The facility has a final maturity date of September 30, 2020, and the principal borrowed under the facility will bear interest at LIBOR for an interest period of three months plus a margin of 6.125% per annum.  The facility has no fixed amortization payments for the first two years and fixed amortization payments of $2,500 per quarter thereafter.  To the extent the value of the collateral under the facility is 182% or less of the loan amount outstanding, the Borrowers are to prepay the loan from earnings received from operation of the thirteen collateral vessels after deduction of the following amounts:  costs, fees, expenses, interest, and fixed principal repayments under the facility; operating expenses relating to the thirteen vessels; and the Borrowers’ pro rata share of general and administrative expenses based on the number of vessels they own.

 

The Facility Agreement requires the Borrowers and, in certain cases, the Company and Holdco to comply with a number of covenants substantially similar to those in the other credit facilities of Genco and its subsidiaries, including financial covenants related to maximum leverage, minimum consolidated net worth, minimum liquidity, and dividends; collateral maintenance requirements; and other customary covenants. The Company is prohibited from paying dividends under this facility until December 31, 2018. Following December 31, 2018, the amount of dividends the Company may pay is limited based on the amount of the repayment of at least $25 million of the loan under such facility, as well as the ratio of the value of vessels and certain other collateral pledged under such facility.  The Facility Agreement includes usual and customary events of default and remedies for facilities of this nature. 

 

Borrowings under the facility are secured by first priority mortgage on the vessels owned by the Borrowers, namely the Genco Constantine, the Genco Augustus, the Genco London, the Genco Titus, the Genco Tiberius, the Genco Hadrian, the Genco Knight, the Genco Beauty, the Genco Vigour, the Genco Predator, the Genco Cavalier, the Genco Champion, and the Genco Charger, and related collateral.  Pursuant to the Facility Agreement and a separate Guarantee executed by the Company, the Company and Holdco are acting as guarantors of the obligations of the Borrowers and each other under the Facility Agreement and its related documentation.

 

On June 29, 2016, the Company entered into a commitment letter (the “$98 Million Credit Facility Commitment Letter”) which provided for certain covenant relief through September 30, 2016.  For such period, compliance with the company-wide minimum cash covenant was waived so long as cash and cash equivalents of the Company were at least $25,000; compliance with the maximum leverage ratio was waived; and the ratio required to be maintained under the Company’s collateral maintenance covenant was 120% rather than 140%.  An amendment to the $98 Million Credit Facility Commitment Letter was entered into on September 30, 2016 (the “Amended $98 Million Credit Facility Commitment Letter”) which extended this covenant relief through November 15, 2016.  Refer to the “Commitment Letter” section above for further discussion.

 

On November 15, 2016, the Company entered into an Amending and Restating Agreement which amended and restated the credit agreements and the guarantee for the $98 Million Credit Facility (the “Restated $98 Million Credit Facility”).  The Restated $98 Million Credit Facility provides for the following: reductions in the minimum liquidity requirements consistent with the $400 Million Credit Facility, except the minimum liquidity amount for the collateral vessels under this facility is $750 per vessel, which is reflected as restricted cash; netting of certain amounts against the measurements of the collateral maintenance covenant, which remains in place with a 140% value to loan threshold; a portion of amounts required to be maintained under the minimum liquidity covenant for this facility may, under certain circumstances, be used to prepay the facility to maintain compliance with the collateral maintenance covenant; elimination of the original maximum leverage ratio and minimum net worth covenants; and restrictions on incurring indebtedness, making investments (other than through non-recourse subsidiaries) or paying dividends, similar to those provided for in the $400 Million Credit Facility.  The minimum working capital and the total indebtedness to total capitalization are the same as the $400 Million Credit Facility. 

 

As of December 31, 2017 and 2016, the Company had deposited $7,234 and $8,242, respectively, that has been reflected as current restricted cash.  As of December 31, 2017 and 2016, the Company had deposited $11,738 and $15,931, respectively, that has been reflected as noncurrent restricted cash.  These amounts include certain restricted deposits associated with the Debt Service Account, Capex Account and minimum liquidity amount as defined in the $98 Million Credit Facility. 

 

As of December 31, 2017, the Company believed it was in compliance with all of the financial covenants under the Restated $98 Million Credit Facility. 

 

The following table sets forth the scheduled repayment of the outstanding principal debt of $93,939 at December 31, 2017 under the Restated $98 Million Credit Facility:

 

 

 

 

 

 

Year Ending December 31, 

    

Total

 

 

 

 

 

 

2018

 

$

10,000

 

2019

 

 

10,000

 

2020

 

 

73,939

 

 

 

 

 

 

Total debt

 

$

93,939

 

 

2014 Term Loan Facilities

 

On October 8, 2014, Baltic Trading and its wholly-owned subsidiaries, Baltic Hornet Limited and Baltic Wasp Limited, each entered into a loan agreement and related documentation for a credit facility in a principal amount of up to $16,800 with ABN AMRO Capital USA LLC and its affiliates (the “2014 Term Loan Facilities”) to partially finance the newbuilding Ultramax vessel that each subsidiary acquired, namely the Baltic Hornet and Baltic Wasp, respectively.  Amounts borrowed and repaid under the 2014 Term Loan Facilities may not be reborrowed.  The 2014 Term Loan Facilities have a ten-year term, and the facility amount is to be the lowest of 60% of the delivered cost per vessel, $16,800 per vessel, and 60% of the fair market value of each vessel at delivery.  The 2014 Term Loan Facilities are insured by the China Export & Credit Insurance Corporation (Sinosure) in order to cover political and commercial risks for 95% of the outstanding principal plus interest, which was recorded in deferred financing fees.  Borrowings under the 2014 Term Loan Facilities bear interest at the three or six-month LIBOR rate plus an applicable margin of 2.50% per annum.  Borrowings are to be repaid in 20 equal consecutive semi-annual installments of 1/24 of the facility amount plus a balloon payment of 1/6 of the facility amount at final maturity.  Principal repayments commenced six months after the actual delivery date for each respective vessel.

 

Borrowings under the 2014 Term Loan Facilities are secured by liens on the vessels acquired with borrowings under these facilities, namely the Baltic Hornet and Baltic Wasp, and other related assets. The Company guarantees the obligations of the Baltic Hornet and Baltic Wasp under the 2014 Term Loan Facilities.

 

The 2014 Term Loan Facilities require the Company, Baltic Hornet Limited and Baltic Wasp Limited to comply with covenants comparable to those of the $44 Million Term Loan Facility, with the exception of the collateral maintenance covenant and minimum cash requirement for the encumbered vessels. Refer to “Amendments and Consent Agreements Related to the Merger” below for collateral maintenance requirements. Additionally, for the 2014 Term Loan Facilities, the Baltic Hornet Limited and Baltic Wasp Limited are required to maintain $750 each in their cash accounts.  Refer to “$44 Million Term Loan Facility” section below.

 

On October 24, 2014, Baltic Trading drew down $16,800 for the purchase of the Baltic Hornet, which was delivered on October 29, 2014.  Additionally, on December 30, 2014, Baltic Trading drew down $16,350 for the purchase of the Baltic Wasp, which was delivered on January 2, 2015.  As of December 31, 2017, the Company had utilized its maximum borrowing capacity and there was no further availability. Total debt repayments of $2,763,  $2,763 and $2,081 were made during the years ended December 31, 2017, 2016 and 2015.  At December 31, 2017 and 2016, the total outstanding net debt balance was $24,214 and $26,784, respectively. 

 

A waiver was entered into on June 30, 2016 with the lenders under the 2014 Term Loan Facilities which waived the collateral maintenance covenant through September 30, 2016.  On August 9, 2016, the Company entered into waiver agreements which extend the existing collateral maintenance covenant through October 15, 2016 and provided for waivers of the maximum leverage ratio covenant through such time.  On October 14, 2016, these waivers were further extended to November 15, 2016. 

 

On November 15, 2016, the Company entered into Supplemental Agreements with lenders under our 2014 Term Loan Facilities which, among other things, amended the Company’s collateral maintenance covenants under the 2014 Term Loan Facilities to provide that such covenants will not be tested through December 30, 2017 and the minimum collateral value to loan ratio will be 100% from December 31, 2017, 105% from June 30, 2018, 115% from December 31, 2018 and 135% from December 31, 2019.  These Supplemental Agreements also provided for certain other amendments to the 2014 Term Loan Facilities, which included reductions in the minimum liquidity requirements consistent with the $400 Million Credit Facility and restrictions on incurring indebtedness, making investments (other than through non-recourse subsidiaries) or paying dividends, similar to the $400 Million Credit Facility. Additionally, the minimum working capital required is the same as the $400 Million Credit Facility.  Lastly, the maximum leverage requirement is equivalent to the debt to total capitalization requirement in the $400 Million Credit Facility.

 

As of December 31, 2017, the Company believed it was in compliance with all of the financial covenants under the 2014 Term Loan Facilities.

 

Refer to “Amendment and Consent Agreements Related to the Merger” section below for discussion of the amendments, consents and waiver agreements entered into on July 14, 2015 by Baltic Trading related to the 2014 Term Loan Facilities.  Upon the completion of the Merger on July 17, 2015, the Company executed a guaranty of the obligations of the borrowers under the 2014 Term Loan Facilities.

 

The following table sets forth the scheduled repayment of the outstanding principal debt of $25,544 at December 31, 2017 under the 2014 Term Loan Facilities:

 

 

 

 

 

 

Year Ending December 31, 

    

Total

 

 

 

 

 

 

2018

 

$

2,763

 

2019

 

 

2,763

 

2020

 

 

2,763

 

2021

 

 

2,763

 

2022

 

 

2,763

 

Thereafter

 

 

11,729

 

 

 

 

 

 

Total debt

 

$

25,544

 

 

Amendment and Consent Agreements Related to the Merger

 

On July 14, 2015, Baltic Trading and certain of its wholly owned subsidiaries entered into agreements (the “Amendment and Consent Agreements”) to amend, provide consents under, or waive certain provisions of the $22 Million Term Loan Facility (as defined below), 2014 Term Loan Facilities and the $148 Million Credit Facility (as defined below) (each a “Facility” and collectively the “Facilities”).  The Amendment and Consent Agreements implemented, among other things, the following:

 

·

The covenants measuring collateral maintenance under the 2014 Term Loan Facilities were amended as follows: the minimum fair market value of vessels pledged as security (together with the value of any additional collateral) is required to be (i) for the period from June 30, 2015 up to and including December 30, 2015, 125% of the amount outstanding under such Facilities; (ii) for the period from December 31, 2015 up to and including March 30, 2016, 130% of such amount; and (iii) for the period from March 31, 2016 and thereafter, 135% of such amount.

 

·

The covenant measuring collateral maintenance under the $22 Million Term Loan Facility was amended so that through and including the period ending June 30, 2016, the minimum fair market value of vessels mortgaged under such Facility is required to be 110% of the amount outstanding under such Facility.

 

·

Under the $148 Million Credit Facility, the covenant measuring collateral maintenance was amended so that through and including the period ending December 31, 2015, the minimum fair market value of vessels mortgaged under such Facility is required to be 130% of the amount outstanding under such Facility and thereafter, 140% of such amount, except that for the period through and including the period ending December 31, 2015, such percentage was increased to 140% at the time of funding of the term loan for the Baltic Scorpion on August 3, 2015. 

 

·

The calculation of the minimum consolidated net worth was reduced by $30,730 to $270,150 under each Facility to account for the reduction of equity due to the impairment associated with the sale of the Baltic Tiger and Baltic Lion vessels.

 

·

The measurement of the maximum leverage ratio under each Facility was amended to exclude from the numerator thereof (which is the amount of indebtedness included in the calculation of such financial covenant) any committed but undrawn working capital lines.

 

·

Under the $148 Million Credit Facility, following consummation of the Merger on July 17, 2015, the amount of cash to be held by the administrative agent under such Facility (or otherwise remaining undrawn under certain working capital lines) for each collateral vessel mortgaged under such Facility, as required under the under the minimum liquidity covenant under such Facility, was amended to an amount of $750 per vessel.

 

·

Following completion of the Merger on July 17, 2015, all corporate wide financial covenants of Baltic Trading are to be measured on a consolidated basis with the Company (the “Consolidated Covenant Amendments”).

 

·

Waivers or consents under the Facilities to permit the delisting of Baltic Trading’s stock on the New York Stock Exchange (which constitutes a change of control under each such Facility) and the termination of the Management Agreement, dated as of March 15, 2010, by and between GS&T and Baltic Trading.

 

·

Waivers or consents under each of the Facilities to permit the Merger.

 

·

Waivers or consents to certain covenants under each of the Facilities to the extent such covenants would otherwise be breached as a result of the Merger.