Wednesday, June 22, 2011

More woes for Genmar shareholders in potential ATM share offering

General Maritime (NYSE: GMR) stumbled badly last year in the timing of its massive Metrostar block tanker acquisition deal. Earlier this year, it made a US$ 200 mio recapitalization agreement with Oaktree Capital for needed funding. Now Genmar management is considering an additional US$ 50 mio ATM share offering for additional liquidity.

Oaktree is well known in shipping for its Beluga takeover. Beluga was a beleaguered German heavy lift company on which Oaktree earlier this year decided to pull the plug, take control of the company, fire the old management with plans to build it up into a major player in the heavy lift market.

Since Oaktree holds a similar share option trigger with Genmar if things do not turn out to their liking, Genmar likely has limited room for much share dilution. This follow-on offering represents only about 25% of its current US$ 200 mio or so in overall shares value.

Genmar management argues that funds will be used as a safety net as it enters the traditionally softer rates climate of summer. They seem concerned about a loan covenant requiring the tanker owner to maintain a minimum cash balance of US$ 50 mio. It has some cushion on other covenants following the Oaktree injection and a refinancing with lenders, but admitted it was close on the cash benchmark on 31 March at US$ 62 mio.

Genmar was recently downgraded to sell by a major Scandinavian capital markets group. They see a potential for 10% lower asset values implying a 60% reduction in NAV. The company suffers very high gearing and 36% of its debt is financed at a cost of 12% or more.

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