UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

 
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  July 3, 2014

 
GENCO SHIPPING & TRADING LIMITED
(Exact Name of Registrant as Specified in Charter)
 
Republic of the Marshall Islands	001-33393	98-043-9758	
(State or Other Jurisdiction
of Incorporation)	(Commission File Number)	(I.R.S. Employer
Identification No.)	

299 Park Avenue
12th Floor
New York, NY	 	 
10171
(Zip Code)	
(Address of Principal Executive Offices)	 	 	

Registrant’s telephone number, including area code:  (646) 443-8550

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

 
	o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	

	o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	

	o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	

	o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 	

Item 7.01.	Regulation FD Disclosure.	

Unaudited Financial Projections

The Company does not as a matter of course make long-term projections as to future revenues, earnings or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates.  However, for purposes of discussion materials provided to members of the Equity Committee in the Chapter 11 Cases, which are set forth in Exhibit 99.1 to this Current Report on Form 8-K (the “Discussion Materials”), the Company’s management prepared unaudited financial projections (the “Financial Projections”).  The Company prepared the Financial Projections with the assistance of its professional advisors. The Financial Projections present, to the best of the Company’s knowledge and based upon the assumptions set forth therein, the reorganized Debtors’ projected cash revenues, cash EBITDA, levered and unlevered free cash flow, and cash position for the second half of 2014 and the fiscal years 2015 through 2017.  The Financial Projections reflect the Debtors’ assumptions and judgments as of April 2014 except with respect to restructuring expenses, which reflect the Debtors’ assumptions and judgments as of the date of the Discussion Materials.

The Financial Projections were based on the assumption that the effective date of the Plan will occur on or about June 30, 2014.  If such Plan does not go effective or if the effective date of the Plan is significantly delayed, additional expenses, including professional fees, may be incurred and operating results may be negatively impacted.  It is also assumed that the Company will conduct operations substantially similar to its current business.

The Financial Projections were not prepared with a view toward complying with accounting principles generally accepted in the United States of America (“U.S. GAAP”), the published guidelines of the Securities and Exchange Commission (“SEC”) regarding projections or the guidelines established by the American Institute of Certified Public Accountants for the preparation and presentation of prospective financial information.  The Company’s independent accountants have not compiled, examined, or performed any procedures with respect to the Financial Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the unaudited financial projections.  Financial projections of the type summarized below are based on estimates and assumptions that are inherently subject to significant economic, industry and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the Company’s control.  The Financial Projections are not fact and should not be relied upon as being indicative of future results which could differ materially from actual performance and results.

As the Company has previously disclosed, a chapter 11 proceeding is viewed as a significant threat to the continuing operations of our international business.  The Company has continued to experience dislocation in its business operations caused by the uncertainty of its financial restructuring process and its bankruptcy filing, and there is no assurance that we will be able to avert loss or reduction in business from our customers.  Furthermore, the drybulk industry has historically been and continues to be subject to significant volatility due to continuously evolving dynamics as they relate to the supply of vessels and demand for shipping services.  The unpredictable nature of factors, such as weather, seasonal demand for resources and

asymmetrical timing of vessel deliveries results in significant freight volatility and could cause actual results to differ.

The Financial Projections do not fully reflect the application of fresh start accounting, which, if required pursuant to U.S. GAAP, is not anticipated to have a material impact on the underlying economics of the Plan.  Any formal fresh-start reporting adjustments that may be required in accordance with Statement of Position 90-7 Financial Reporting by Entities in Reorganization under the Bankruptcy Code, including any allocation of the Company’s reorganization value to the Company’s assets in accordance with the procedures specified in Financial Accounting Standards Board Statement 141, will be made after the Company emerges from bankruptcy.

The Financial Projections are subjective in many respects and thus subject to interpretation.  While presented with numeric specificity, they are necessarily based on a variety of estimates and assumptions which, though considered reasonable by the Company’s management, may not be realized, and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control.  The Financial Projections are not indicative of current values or future performance, which may be significantly more favorable or less favorable.  The Company cautions that no representations can be made as to the accuracy of these financial projections or to the Company’s ability to achieve the projected results.  Some assumptions inevitably will not materialize.  Further, events and circumstances occurring subsequent to the date on which these financial projections were prepared may be different from those assumed or, alternatively, may have been unanticipated and, thus, the occurrence of these events may affect financial results in a material and possibly adverse manner.  Furthermore, the unaudited financial projections do not necessarily reflect current estimates or assumptions Company management may have about prospects for the Company’s business, changes in general business or economic conditions, or any other transaction or event that has occurred or that may occur and that was not anticipated at the time the financial projections were prepared.

Except as otherwise noted, the Financial Projections do not take into account any circumstances or events occurring after the date they were prepared.  Except as may be required in the Chapter 11 Cases, the Company does not intend to update or revise any of the Financial Projections to reflect circumstances existing after the date such projections were prepared or to reflect the occurrence of any particular events.  The Financial Projections are forward-looking statements.

Readers of this Form 8-K are cautioned not to rely on the Financial Projections and are urged to review the Company’s most recent SEC filings for additional information on factors which may cause the Company’s future financial results to materially vary from the unaudited financial projections.  In addition, such readers are also urged to review the Company’s most recent SEC filings for a description of the Company’s reported results of operations, financial condition and capital resources during the fiscal year ended December 31, 2013. None of the unaudited financial projections should be viewed as a representation by the Company or any of its advisors or representatives that the projections or forecasts reflected therein will be achieved.  The inclusion of the Financial Projections in this Form 8-K should not be regarded as an indication that the Company or any other recipient of this information

considered, or now considers, this information to be necessarily predictive of actual future results nor construed as financial guidance, and they should not be relied on as such.

Expert Reports Relating to Valuation

In connection with the confirmation hearing in the Chapter 11 Cases, the Debtors produced reports of expert witnesses who testified on the Debtors’ behalf in respect of the valuation of the Debtors, namely Blackstone Advisory Partners LP, Maritime Strategies International Ltd., and Marsoft Inc.  Copies of such reports or the substance thereof have been entered into the case docket for the Chapter 11 Cases and are publicly available under “Case Docket” at www.gencorestructuring.com .  Such reports do not predict or reflect post-confirmation trading prices of the reorganized Company’s common stock. Such securities may trade at substantially lower or higher prices because of a number of factors. The trading prices of securities issued under the Plan are subject to many unforeseen circumstances and therefore cannot be predicted.  Such reports are also subject to the limitations, qualifications, and disclaimers set forth therein.

In addition, the Equity Committee has also filed the reports of Rothschild Inc. and CMG Advisory Services LLC on the case docket for the Chapter 11 Cases.  These reports were prepared in connection with the litigation commenced by the Equity Committee to oppose confirmation of the Plan.  The Debtors do not agree with the views expressed by the Equity Committee in the litigation or in any report, declaration or pleading filed by the Equity Committee.

*              *              *

The information set forth under this Item 7.01, including Exhibits 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, as amended, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
 
Non-GAAP Financial Measures
 
This Form 8-K, in addition to containing results that are determined in accordance with U.S. GAAP, contains certain forward-looking non-GAAP financial measures.  The Company has not provided a reconciliation of the forward-looking non-GAAP financial measures included in this Form 8-K to the directly comparable GAAP measures because, due primarily to variability and difficulty in making accurate forecasts and projections, not all of the information necessary to forecast and quantify the exact amount of the items excluded from the non-GAAP financial measures that will be included in the comparable GAAP financial measures is available to the Company without unreasonable efforts.
 
“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995
 
This Form 8-K contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are based on management’s current expectations and observations and

include factors that could cause actual results to differ materially such as:  the Company’s ability to operate its business consistent with its projections generally, including the ability to maintain or increase revenue and cash flow to satisfy its liquidity needs, service its indebtedness and finance the ongoing obligations of its business, and to manage its future operating expenses and make necessary capital expenditures; the Company’s ability to comply with the covenants and conditions under its credit facilities and borrow thereunder; the Company’s ability to timely and effectively implement and execute its plans to restructure its capital structure; the Company’s ability to arrange and consummate financing or sale transactions or to access capital; the loss or reduction in business from the Company’s significant charterers or the failure of the Company’s significant charterers to perform their obligations to the Company; the loss or material downtime of major suppliers; the extent to which the Company’s operating results continue to be affected by weakness in market conditions and charter rates; whether the Company is able to generate sufficient cash flows to meet its liquidity needs, service its indebtedness and finance the ongoing obligations of its business;   the Company’s ability to continue as a going concern; the Company’s ability to obtain bankruptcy court approval with respect to motions in the Chapter 11 Cases described in the Company’s Current Report on Form 8-K filed on April 3, 2014; the Company’s ability to consummate the plan of reorganization with respect to the Chapter 11 Cases; the effects of  bankruptcy court rulings in the Chapter 11 Cases and the outcome of the case in general; the length of time the Company will operate under the Chapter 11 Cases; the pursuit by the Company’s various creditors, equity holders and other constituents of their interests in the Chapter 11 Cases; risks associated with third party motions in the Chapter 11 Cases; the potential adverse effects of the Chapter 11 proceedings on liquidity or results of operations; the effects of changes in the Company’s credit ratings; the occurrence of any event, change or other circumstance that could give rise to the termination of any restructuring agreement or equity commitment letter in connection with the Company’s restructuring; increased administrative and restructuring costs related to the Chapter 11 Cases; the Company’s ability to meet current operating needs, including the Company’s ability to maintain contracts that are critical to its operation, to obtain and maintain acceptable terms with its vendors, customers and service providers and to retain key executives, managers and employees and other factors listed from time to time in the Company’s filings with the SEC, including, without limitation, its Annual Report on Form 10-K for the year ended December 31, 2013 and its subsequent filings on Form 10-Q and Form 8-K.
 
Item 9.01.	Financial Statements and Exhibits	
 
(d) Exhibits:
 
The following exhibits are filed herewith:

	Exhibit No .	Description	

 	99.1	Discussion Materials	

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, Genco Shipping & Trading Limited has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 		GENCO SHIPPING & TRADING LIMITED	
 			
 		DATE:   July 3, 2014	
 			
 	 	 /s/ John C. Wobensmith	
 	 	John C. Wobensmith	
 	 	Chief Financial Officer and Secretary	
 	 	(Principal Financial and Accounting Officer)	

EXHIBIT INDEX

	Exhibit No .	Description	

 	99.1	Discussion Materials	

Exhibit 99.1

 Preliminary and subject to changePrivileged and confidentialPrepared at the request of counsel  Equity Committee MeetingMay 13, 2014  Genco Shipping & Trading Limited  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408 

 Preliminary and subject to changePrivileged and confidentialPrepared at the request of counsel  Company Overview 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Company Overview  Genco Shipping & Trading Limited, along with 57 direct and indirect subsidiaries, (“Genco” or the “Company”) is a leading provider of international seaborne transportation services for drybulk cargoThe major bulks shipped include coal, iron ore and grainThe minor bulks include agricultural products, mineral cargoes, cement, forest products, steel productsThe Company’s fleet consists of 53 drybulk carriers with an aggregate carrying capacity of ~3,810,000 dwt and an average age of ~9 years9 Capesize8 Panamax17 Supramax6 Handymax13 HandysizeWith headquarters in Manhattan, Genco operates its fleet internationally 1,000 ports of call in over 110 countriesNot subject to the Jones ActEntire team of 33 management employees located in New York 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Company Overview (cont.)  While Genco’s management team has strong relationships with charter counterparties and a history of lean operations, the dry bulk market is commoditizedIndustry-wide, ownership of drybulk vessels is highly fragmented, with ownership of over 10,000 drybulk vessels divided across approximately 1,735 independent drybulk carrier ownersVessels are bought and sold in active secondary marketsOther than the need for capital, there are minimal barriers to entry given the quantity of capable shipyards and their significant capacityGiven the commoditized and fragmented nature of the drybulk business and the current oversupply of vessels, rates are established by the market with drybulk ship owners having little to no ability to influence charter ratesGenco has de minimis fixed rate time-charter coverage and its cash flow is susceptible to significant volatilityBetween now and September 2014, 20 time charters will expire and require renewal 

 Preliminary and subject to changePrivileged and confidentialPrepared at the request of counsel  Business Plan 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Overview  The Company has prepared a Business Plan, built on a vessel-by-vessel basis, underlying the Prepack PlanThe primary operating assumptions include:Fleet: Consistent with prudent industry practice, the Company will pursue a “fleet renewal” program. When vessels reach their 20th birthday, they may still be operated; however, the Company will also purchase new comparable vessels from time to time to replenish the fleetRates: Based on analyst projections for 2014-15 and Marsoft’s projections thereafterCommissions: Based on historical and industry standard ratesOther Revenue: Assumes continued service revenue from third party management agreements throughout the projection periodOpEx: Based on historical OpEx per vessel class and assumes continued cost-efficient operationsDrydock: Projected vessel-by-vessel based on each ships’ last drydock, currently scheduled drydock and age; includes future installation of ballast water treatment systemsG&A: Based on historical G&A and assumes continued lean operationsThe following pages set forth the detailed assumptions of the Business Plan and its financial forecast 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Operating Assumptions (cont.)  Assumption  FleetComposition  As part of a fleet renewal program, the Company projects purchasing new comparable class replacement vessels whenever a currently owned vessel reaches its 20th birthday (4 vessels over the projection period) The Company also plans to opportunistically consider and pursue new-build and secondhand purchase opportunities as they become available, but such opportunities are not included in the Business Plan projectionsNo vessels are projected to be scrapped in the Business Plan as no vessel reaches its 25th birthday during the projection periodThe Business Plan assumes that vessel purchases are financed with 50% debt and 50% equity, which would be raised at the time of purchase  Rate Forecasts  For 2014-2015, the Company has used equity research rate projections from the financial institutions that have historically covered GencoThe Company uses the average of the “bottom half” of these estimates consistent with historical methodology2016 and 2017 are based on Marsoft’s base case Baltic Index projections as of Q1-2014  Spot Revenue Adjustments  A unique adjustment factor is applied to the gross spot rate earned by each vessel to account for differences in size, age, and conditionFor example, the Genco Mare, a 2.5 year old Handysize, is expected to earn 105% of the projected rate when in the spot marketAdditionally, Genco’s Handymax vessels are derived from Supramax projections, and then adjusted to reflect the smaller sizeGenco’s Handymax vessels are assumed to earn 90% of the Supramax rate; this has historically been an appropriate proxy to account for Handymax vessels smaller size relative to Supramax vessels 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Operating Assumptions (cont.)  Assumption  Service Revenue  The Business Plan assumes continued service revenue from third party management agreements  Fleet Utilization  Utilization factor accounts for unplanned off-hire due to maintenance, repairs, and repositioning98% utilization factor applied to the difference of Calendar Days and Scheduled Drydocking Days  Commissions  Time charters generally contain commissions of 5.0%, with limited exceptionsProjections assume that 5.0% commissions are paid on all spot revenues earned  Taxes  The projections for taxes are estimated based on the income from service revenues, as described above  OpEx  Vessel operating expenses include crew wages and related costs, the cost of insurance, expenses relating to repairs and maintenance (excluding drydocking), the cost of spares and consumable stores, tonnage taxes and other miscellaneous expenses Daily vessel operating expense for 2014 is based on the Company’s budget with its third-party technical managers:Capesize: $6,000 per dayPanamax: $5,300 per daySupramax: $5,200 per dayHandymax: $5,000 per dayHandysize: $4,900 per dayBudgeted amounts for 2014 are subject to inflation of 2.0% per year 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Operating Assumptions (cont.)  Assumption  G&A  G&A is estimated based on historical expenses and the Company’s view of continued lean operationsThere are two fundamental components of G&ACore G&A (approximately $19mm per year): Includes cash expenses such as rent, compensation, insurance and reportingRestricted Stock Amortization (approximately $1.0-$2.5mm per year): For expense purposes only; does not contain cash component  Technical Management Fee  Technical management involves the day-to-day management of vessels, including performing routine maintenance, attending to vessel operations and arranging for crews and supplyThe Company contracts three independent technical managers to provide these services and management oversees the activitiesThe projections assume $130k per vessel per yearConsistent with budget and the current arrangements with third-party independent managers (Wallem, Anglo-Eastern, and V. Ships) 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Operating Assumptions  Drydock Projections  Drydock expenses are based on expected maintenance requirements corresponding to the age of the Company’s fleetThe Company negotiates directly with drydock yards and it’s internally employed superintendents attend and supervise all drydock sessionsVessels are drydocked near their 5th, 10th, and 15th years of serviceAfter a vessel’s third drydock session, drydockings occur every 24-36 months (for purposes of projections, a 30-month interval is assumed)All drydocks are assumed to last 20 daysDrydock projections also include fuel-efficiency upgrades on 17 of the Company’s vessels over the projection period, at a cost of $250,000 - $500,000 per vesselFor projection purposes, cash cost is incurred at completion of the drydock and expensed evenly until the next drydock, however, timing of actual drydock payments may vary  Ballast Water Treatment System  New regulations have been announced requiring the installation of ballast water treatment systems; while the convention will be in force at different times throughout the world (and has yet to be confirmed in some cases), the Company expects to install these systems during each vessel’s first drydock after January 1, 2016Cost is incremental to expected drydock costs and varies by vessel classCapesize: $950kPanamax: $800kSupramax: $750kHandymax: $700kHandysize: $650kSimilar to the treatment of drydock costs, the projections assume cash cost of ballast water treatment systems is incurred at completion of the relevant drydock session; cost is then expensed over the remaining life of the vessel  Assumption 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Operating Projections 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Levered Projections 

 Preliminary and subject to changePrivileged and confidentialPrepared at the request of counsel  Restructuring Background & Discussion 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Restructuring Background  Potential covenant defaults under Prepetition Credit Facilities in 2011 & 2012 led to amendments, waivers of covenants and amortization holidaysDuring this process, the Company’s liquidity pressures and the need for a significant financial restructuring were disclosed in at least 19 SEC filings since February 2013, including nine 8-K’s filed since February 2014In late 2013, with the end of amortization holiday looming, the Company began the process for a comprehensive restructuring Again, this was widely disclosed in the industry and financial market. Payment of amortization would have led to breach in financial covenants and depletion of necessary liquidity adversely affecting the Company's ability to continue meeting operating obligations.In 2014, ~$221 million in annual amortization would become due $55.2 million due in the first quarter 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Negotiation Summary & Consideration to Equity  Beginning in late 2013, the Company began organizing its secured creditors and an ad hoc group of convertible noteholders.Steering Committee of 2007 Facility Lenders$253 Million Lenders & $100 Million LendersAd hoc group of informal group of Convertible Notes (“Converts”)Specifically, the Company (i) organized its secured and unsecured creditors, including their engagement of legal (Milbank, Akin and Paul Weiss) and/or financial advisors (Houlihan Lokey and Jeffries), (ii) had initial meetings and discussions with each creditor group’s professionals and, thereafter, the Steering Committee of 2007 Facility Lenders and a restricted group of the Converts, (iii) developed and negotiated a restructuring framework with the various groups of secured creditors, and (iv) engaged in substantive negotiations with the Converts for further improvement of recoveries for creditors – all in furtherance of avoiding a nonconsensual “free-fall” bankruptcy which would impair values for all stakeholders. The negotiations and restructuring process overseen by Board of Directors, which includes 7 members, including 6 independent directors.There were at least 12 meetings of the Board since January 1, 2014 and through the meeting approving the commencement of the Prepack Chapter 11 caseThe Board was extremely proactive throughout the negotiation process 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Negotiation Summary & Consideration to Equity  The negotiations were extensive. During this negotiation, the Company required various forbearances and waivers to avoid exercise of remedies and/or defaults which could impair value to all stakeholdersIn mid-February, the Company missed an interest payment owed to the Converts which required a waiver from the $100 Million Lenders to avoid a cross-default Prior to the end of the 30 day interest payment default grace period, based upon preliminary progress towards a consensual restructuring, the Company made the Convert interest payment to obtain additional time to continue negotiations and avoid a “free-fall” bankruptcyHowever, to preserve necessary liquidity, the Company did not make the required ~$48 million amortization payment due on March 31st to the 2007 Facility Lenders. To avoid an immediate exercise of remedies, shortly before midnight on March 31st, the Company required and obtained a 36 hour forbearance from the 2007 Lenders as well as a waiver of cross-defaults from the other secured lenders. The March 31st forbearance/waiver would terminate if an RSA was not signed by 11:59 pm on April 4th. The RSA was timely executed and went effective, thereby extending the forbearance and waiver periods to April 21st to document the transaction. Various 8-Ks were filed during this process. 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Negotiation Summary & Consideration to Equity (cont.)  Initial negotiations with the 2007 Lenders in January had a significantly reduced recovery and impairment of all GUCs, including the Converts. The 2007 Lenders would not agree to any recovery opportunity for the Existing EquityThe Company engaged in extensive negotiations to improve recovery for all GUCs, while keeping open the opportunity for a recovery for Existing Equity – despite impairment of creditors Throughout the negotiations, despite impairment for the 2007 Lenders, the $253 Million and $100 Million Lenders, and the Converts, the Company insisted that there should be an opportunity for the Existing Equity to participate in any long-term recovery through issuance of warrantsAs noted, significant pushback from 2007 Facility Lenders and, later, the ConvertsDespite considerable pushback, the 2007 Facility Lenders offered the Existing Equity warrants for 1.5% of the reorganized equity in exchange for agreement to proceed expeditiously to preserve business valuesFollowing further negotiation, the Company was able to substantially increase the existing equity recovery to warrants for 6.0% of the reorganized equityAs discussed on the following pages, the Company believes the consideration being offered to Existing Equity is a gift and more than Existing Equity would be entitled to receive under a non-consensual bankruptcy plan 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Evaluation of Alternatives  The Company contemplated alternative restructuring approaches and believes the currently proposed plan (the “Prepack Plan”) maximizes value for all stakeholders and minimizes risk from a nonconsensual bankruptcyPotential alternative approaches included (i) continued periodic credit facility amendments or (ii) a sale processPeriodic Amendments: The Company cannot continue with periodic amendments due to its over-levered capital structureNo dispute that the Company must delever and needs a substantial restructuring of its balance sheetThe 2007 Facility has a Loan-to-Vessel-Value (“LTV”) of approximately 130% The 2007 Facility Lenders agreed to equitize their claims to right-size the capital structure now – a result that cannot be achieved without the their consentInitially, agreement to equitize only a portion of secured debt (all but $360 million of new or take-back secured debt) Later agreement to convert the entire $1 billion+ facility to strengthen balance sheet for post-emergence operations  

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Evaluation of Alternatives (cont.)  Pursuing a protracted sales process as part of a bankruptcy case would jeopardize the consideration currently being offered to all stakeholders under the Prepack Plan, including the Existing Equity As previously highlighted, despite its well-publicized financial distress, no interested party has approached the Company for a transaction – let alone a party that could credibly provide the Company with in excess of $1.61 billionIn contrast, the Prepack Plan preserves values and provides Existing Equity with an opportunity to participate in future success of a significant consensual deleveraging of the Company. By receiving warrants, Existing Equity will receive upside benefit from any success by the post-emergence Genco with a dramatically deleveraged balance sheet and new liquidity 

 Preliminary and subject to changePrivileged and confidentialPrepared at the request of counsel  Financing Discussion 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  Financing Summary  As part of the restructuring process, the Company and its advisors evaluated the post-reorganization capital structureThe Company initially entertained a 50% loan to vessel value capital structure to see if the terms would be attractive and/or availableAlternative financing discussions were central to the Company’s initial meetings with the $253 million Facility Lenders, $100 Million Facility Lenders, and 2007 Facility LendersWhile the $253 million/$100 million Facility Lenders indicated a willingness to amend & extend their debt (as provided for in the Prepack Plan), the Company explored third party financing for these facilitiesThe 2007 Facility Lenders initially agreed to a structure that retained $360 million of secured debt (in addition to the amended and restated term loan facility debt), preferably through third party financing and, if necessary, through more costly “take-back” debtAfter speaking with existing lenders and other outside parties, the Company requested formal indications for new financing from 4 partiesNone of the indications from potential lenders were at attractive or favorable terms (and certainly not when compared with the debt conversion and amended/extended term loan facilities under the Prepack Plan) 

 Preliminary and subject to changePrivileged and confidentialPrepared at the request of counsel  Concluding Remarks 

 

 *  Preliminary and subject to changePrivileged and confidentialSubject to F.R.E. 408  The Prepack Plan offers significant benefit for all stakeholders including the Existing EquityAvoids disruption to international operationsDramatically delevers balance sheet and positions the Company to compete in a highly competitive industryObtains significant concessions from secured creditors which cannot be obtained without their consent, including elimination of over $1 billion of secured debtObtains 2-4 years of additional time to repay the $253 Million and $100 Million Loan Facilities, preserving future capital for CompanyNew fully-committed $100 million facility for operationsThrough consensual impairment, allows business to operate as usualProvides 6% warrants to Existing Equity  Prepack Plan