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EX-32.2 - EX-32.2 - GENCO SHIPPING & TRADING LTDa15-11937_1ex32d2.htm
EX-31.1 - EX-31.1 - GENCO SHIPPING & TRADING LTDa15-11937_1ex31d1.htm
EX-32.1 - EX-32.1 - GENCO SHIPPING & TRADING LTDa15-11937_1ex32d1.htm
EX-31.2 - EX-31.2 - GENCO SHIPPING & TRADING LTDa15-11937_1ex31d2.htm
EX-10.17 - EX-10.17 - GENCO SHIPPING & TRADING LTDa15-11937_1ex10d17.htm
EX-10.16 - EX-10.16 - GENCO SHIPPING & TRADING LTDa15-11937_1ex10d16.htm
EX-10.19 - EX-10.19 - GENCO SHIPPING & TRADING LTDa15-11937_1ex10d19.htm
EX-10.13 - EX-10.13 - GENCO SHIPPING & TRADING LTDa15-11937_1ex10d13.htm
EX-10.14 - EX-10.14 - GENCO SHIPPING & TRADING LTDa15-11937_1ex10d14.htm
EX-10.12 - EX-10.12 - GENCO SHIPPING & TRADING LTDa15-11937_1ex10d12.htm
EX-10.18 - EX-10.18 - GENCO SHIPPING & TRADING LTDa15-11937_1ex10d18.htm
EX-10.20 - EX-10.20 - GENCO SHIPPING & TRADING LTDa15-11937_1ex10d20.htm
EX-10.15 - EX-10.15 - GENCO SHIPPING & TRADING LTDa15-11937_1ex10d15.htm

Table of Contents

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2015

 

OR

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from           to         

 

Commission file number 001-33393

 


 

GENCO SHIPPING & TRADING LIMITED

(Exact name of registrant as specified in its charter)

 

Republic of the Marshall Islands

 

98-043-9758

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

299 Park Avenue, 12th Floor, New York, New York 10171

(Address of principal executive offices) (Zip Code)

 

(646) 443-8550

(Registrant’s telephone number, including area code)

 


 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

 

Accelerated filer o

 

 

 

Non-accelerated filer x

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

The number of shares outstanding of each of the issuer’s classes of common stock, as of August 10, 2015: Common stock, $0.01 per share — 72,897,616 shares.

 

 

 



Table of Contents

 

Genco Shipping & Trading Limited

 

 

 

Page

 

 

 

PART I — FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (unaudited)

 

 

 

 

 

a)

Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014

1

 

 

 

 

 

b)

Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2015 and 2014

2

 

 

 

 

 

c)

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months ended June 30, 2015 and 2014

3

 

 

 

 

 

d)

Condensed Consolidated Statements of Equity for the Six Months ended June 30, 2015 and 2014

4

 

 

 

 

 

e)

Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2015 and 2014

5

 

 

 

 

 

f)

Notes to Condensed Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

33

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

59

 

 

 

Item 4.

Controls and Procedures

61

 

 

 

PART II —OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

62

 

 

 

Item 1A.

Risk Factors

62

 

 

 

Item 5.

Other Information

62

 

 

 

Item 6.

Exhibits

63

 

i



Table of Contents

 

Website Information

 

We intend to use our website, www.GencoShipping.com, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in our website’s Investor section. Accordingly, investors should monitor the Investor portion of our website, in addition to following our press releases, SEC filings, public conference calls, and webcasts. To subscribe to our e-mail alert service, please submit your e-mail address at the Investor Relations Home page of the Investor section of our website. The information contained in, or that may be accessed through, our website is not incorporated by reference into or a part of this document or any other report or document we file with or furnish to the SEC, and any references to our website are intended to be inactive textual references only.

 

ii



Table of Contents

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Genco Shipping & Trading Limited

Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014

(U.S. Dollars in thousands, except for share and per share data)

(Unaudited)

 

 

 

Successor

 

Successor

 

 

 

June 30,
2015

 

December 31,
2014

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

61,648

 

$

83,414

 

Restricted cash

 

9,750

 

9,750

 

Due from charterers, net of a reserve of $1,292 and $1,588, respectively

 

14,456

 

14,739

 

Prepaid expenses and other current assets

 

22,616

 

22,423

 

Total current assets

 

108,470

 

130,326

 

 

 

 

 

 

 

Noncurrent assets:

 

 

 

 

 

Vessels, net of accumulated depreciation of $70,977 and $36,258, respectively

 

1,490,043

 

1,532,843

 

Deposits on vessels

 

19,926

 

25,593

 

Deferred drydock, net of accumulated amortization of $1,325 and $330, respectively

 

12,539

 

6,234

 

Deferred financing costs, net of accumulated amortization of $1,780 and $729, respectively

 

11,348

 

10,271

 

Fixed assets, net of accumulated depreciation and amortization of $236 and $119, respectively

 

1,017

 

701

 

Other noncurrent assets

 

514

 

514

 

Restricted cash

 

300

 

19,945

 

Investments

 

25,443

 

26,486

 

Total noncurrent assets

 

1,561,130

 

1,622,587

 

Total assets

 

$

1,669,600

 

$

1,752,913

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued expenses

 

$

33,132

 

$

28,217

 

Current portion of long-term debt

 

44,792

 

34,324

 

Deferred revenue

 

1,398

 

1,397

 

Total current liabilities

 

79,322

 

63,938

 

 

 

 

 

 

 

Noncurrent liabilities:

 

 

 

 

 

Long-term lease obligations

 

789

 

390

 

Long-term debt

 

403,825

 

395,811

 

Total noncurrent liabilities

 

404,614

 

396,201

 

 

 

 

 

 

 

Total liabilities

 

483,936

 

460,139

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

Equity:

 

 

 

 

 

Genco Shipping & Trading Limited shareholders’ equity:

 

 

 

 

 

Successor Company common stock, par value $0.01; 250,000,000 shares authorized; issued and outstanding 61,610,503 and 61,541,389 shares at June 30, 2015 and December 31, 2014, respectively

 

615

 

615

 

Successor Company additional paid-in capital

 

1,274,588

 

1,251,197

 

Accumulated other comprehensive loss

 

(26,360

)

(25,317

)

Retained deficit

 

(261,067

)

(182,294

)

Total Genco Shipping & Trading Limited shareholders’ equity

 

987,776

 

1,044,201

 

Noncontrolling interest

 

197,888

 

248,573

 

Total equity

 

1,185,664

 

1,292,774

 

Total liabilities and equity

 

$

1,669,600

 

$

1,752,913

 

 

See accompanying notes to condensed consolidated financial statements.

 

1



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014

(U.S. Dollars in Thousands, Except for Earnings Per Share and Share Data)

(Unaudited)

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 

Successor

 

Predecessor

 

Successor

 

Predecessor

 

 

 

2015

 

2014

 

2015

 

2014

 

Revenues:

 

 

 

 

 

 

 

 

 

Voyage revenues

 

$

33,772

 

$

51,545

 

$

67,381

 

$

114,725

 

Service revenues

 

819

 

819

 

1,629

 

1,629

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

34,591

 

52,364

 

69,010

 

116,354

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Voyage expenses

 

3,757

 

1,983

 

8,137

 

3,940

 

Vessel operating expenses

 

29,928

 

30,545

 

58,599

 

61,768

 

General, administrative and management fees

 

26,491

 

9,850

 

46,815

 

25,226

 

Depreciation and amortization

 

19,399

 

36,538

 

38,809

 

72,739

 

Impairment of vessel assets

 

 

 

35,396

 

 

Loss on sale of vessels

 

1,210

 

 

1,210

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

80,785

 

78,916

 

188,966

 

163,673

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(46,194

)

(26,552

)

(119,956

)

(47,319

)

 

 

 

 

 

 

 

 

 

 

Other (expense) income:

 

 

 

 

 

 

 

 

 

Other expense

 

(65

)

(50

)

(54

)

(107

)

Interest income

 

25

 

25

 

49

 

45

 

Interest expense

 

(4,687

)

(18,510

)

(9,012

)

(39,532

)

 

 

 

 

 

 

 

 

 

 

Other expense

 

(4,727

)

(18,535

)

(9,017

)

(39,594

)

 

 

 

 

 

 

 

 

 

 

Loss before reorganization items, net

 

(50,921

)

(45,087

)

(128,973

)

(86,913

)

Reorganization items, net

 

(313

)

(20,106

)

(833

)

(20,106

)

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

(51,234

)

(65,193

)

(129,806

)

(107,019

)

Income tax expense

 

(718

)

(364

)

(1,260

)

(777

)

 

 

 

 

 

 

 

 

 

 

Net loss

 

(51,952

)

(65,557

)

(131,066

)

(107,796

)

Less: Net loss attributable to noncontrolling interest

 

(11,620

)

(5,033

)

(52,293

)

(8,166

)

Net loss attributable to Genco Shipping & Trading Limited

 

$

(40,332

)

$

(60,524

)

$

(78,773

)

$

(99,630

)

 

 

 

 

 

 

 

 

 

 

Net loss per share-basic

 

$

(0.67

)

$

(1.39

)

$

(1.30

)

$

(2.29

)

Net loss per share-diluted

 

$

(0.67

)

$

(1.39

)

$

(1.30

)

$

(2.29

)

Weighted average common shares outstanding-basic

 

60,487,189

 

43,568,942

 

60,459,145

 

43,568,942

 

Weighted average common shares outstanding-diluted

 

60,487,189

 

43,568,942

 

60,459,145

 

43,568,942

 

Dividends declared per share

 

$

 

$

 

$

 

$

 

 

See accompanying notes to condensed consolidated financial statements.

 

2



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Statements of Comprehensive Loss

For the Three and Six Months Ended June 30, 2015 and 2014

(U.S. Dollars in Thousands)

(Unaudited)

 

 

 

For the Three Months Ended
June 30,

 

For the Six Months
Ended June 30,

 

 

 

Successor

 

Predecessor

 

Successor

 

Predecessor

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(51,952

)

$

(65,557

)

$

(131,066

)

$

(107,796

)

 

 

 

 

 

 

 

 

 

 

Change in unrealized gain (loss) on investments

 

(3,402

)

(13,737

)

(1,043

)

(27,952

)

Unrealized gain on cash flow hedges, net

 

 

1,078

 

 

2,306

 

Other comprehensive loss

 

(3,402

)

(12,659

)

(1,043

)

(25,646

)

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

(55,354

)

(78,216

)

(132,109

)

(133,442

)

Less: Comprehensive loss attributable to noncontrolling interest

 

(11,620

)

(5,033

)

(52,293

)

(8,166

)

Comprehensive loss attributable to Genco Shipping & Trading Limited

 

$

(43,734

)

$

(73,183

)

$

(79,816

)

$

(125,276

)

 

See accompanying notes to condensed consolidated financial statements.

 

3



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Statements of Equity

For the Six Months Ended June 30, 2015 and 2014

(U.S. Dollars in Thousands)

(Unaudited)

 

 

 

Common
Stock

 

Additional
Paid-in
Capital

 

Accumulated
Other
Comprehensive
(Loss)
Income

 

Retained
(Deficit)
Earnings

 

Genco
Shipping &
Trading
Limited
Shareholders’
Equity

 

Noncontrolling
Interest

 

Total Equity

 

Balance — January 1, 2015 (Successor)

 

$

615

 

$

1,251,197

 

$

(25,317

)

$

(182,294

)

$

1,044,201

 

$

248,573

 

$

1,292,774

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

(78,773

)

(78,773

)

(52,293

)

(131,066

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized loss on investments

 

 

 

 

 

(1,043

)

 

 

(1,043

)

 

(1,043

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Settlement of non-accredited Note holders

 

 

 

(414

)

 

 

 

 

(414

)

 

(414

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity effect of purchase of entities under common control

 

 

 

590

 

 

 

 

 

590

 

 

590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonvested stock amortization

 

 

 

23,215

 

 

 

 

 

23,215

 

1,608

 

24,823

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — June 30, 2015 (Successor)

 

$

615

 

$

1,274,588

 

$

(26,360

)

$

(261,067

)

$

987,776

 

$

197,888

 

$

1,185,664

 

 

 

 

Common
Stock

 

Additional
Paid-in
Capital

 

Accumulated
Other
Comprehensive
(Loss)
Income

 

Retained
(Deficit)
Earnings

 

Genco
Shipping &
Trading
Limited
Shareholders’
Equity

 

Noncontrolling
Interest

 

Total Equity

 

Balance — January 1, 2014 (Predecessor)

 

$

445

 

$

846,658

 

$

53,722

 

$

66,644

 

$

967,469

 

$

341,336

 

$

1,308,805

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

(99,630

)

(99,630

)

(8,166

)

(107,796

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gain on investments

 

 

 

 

 

(27,952

)

 

 

(27,952

)

 

(27,952

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on cash flow hedges, net

 

 

 

 

 

2,306

 

 

 

2,306

 

 

2,306

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonvested stock amortization

 

 

 

820

 

 

 

 

 

820

 

1,871

 

2,691

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid by Baltic Trading Limited

 

 

 

(5

)

 

 

 

 

(5

)

(2,041

)

(2,046

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted shares issued by Baltic Trading Limited

 

 

 

74

 

 

 

 

 

74

 

(74

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance — June 30, 2014 (Predecessor)

 

$

445

 

$

847,547

 

$

28,076

 

$

(32,986

)

$

843,082

 

$

332,926

 

$

1,176,008

 

 

See accompanying notes to condensed consolidated financial statements.

 

4



Table of Contents

 

Genco Shipping & Trading Limited

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014

(U.S. Dollars in Thousands)

(Unaudited)

 

 

 

Successor

 

Predecessor

 

 

 

For the Six
Months Ended
June 30,
2015

 

For the Six
Months Ended
June 30,
2014

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(131,066

)

$

(107,796

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

Depreciation and amortization

 

38,809

 

72,739

 

Amortization of deferred financing costs

 

1,051

 

4,291

 

Amortization of time charters acquired

 

 

(67

)

Amortization of discount on Convertible Senior Notes

 

 

1,592

 

Interest expense related to the de-designation of the interest rate swap

 

 

953

 

Amortization of nonvested stock compensation expense

 

24,823

 

2,691

 

Impairment of vessel assets

 

35,396

 

 

Loss on disposal of vessels

 

900

 

 

Change in assets and liabilities:

 

 

 

 

 

Decrease in due from charterers

 

283

 

2,241

 

Increase in prepaid expenses and other current assets

 

(200

)

(4,227

)

Increase in accounts payable and accrued expenses

 

7,075

 

14,064

 

Increase (decrease) in deferred revenue

 

1

 

(446

)

Increase in lease obligations

 

399

 

197

 

Deferred drydock costs incurred

 

(7,301

)

(9,288

)

 

 

 

 

 

 

Net cash used in operating activities

 

(29,830

)

(23,056

)

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchase of vessels, including deposits

 

(24,719

)

(29,790

)

Purchase of other fixed assets

 

(353

)

(391

)

Changes in deposits of restricted cash

 

19,645

 

(125

)

 

 

 

 

 

 

Net cash used in investing activities

 

(5,427

)

(30,306

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Repayments on the $100 Million Term Loan Facility

 

(3,846

)

(1,923

)

Repayments on the $253 Million Term Loan Facility

 

(10,150

)

(5,075

)

Proceeds from the 2015 Revolving Credit Facility

 

25,000

 

 

Repayments on the $44 Million Term Loan Facility

 

(1,375

)

(1,375

)

Proceeds from the Baltic Trading $148 Million Credit Facility

 

115,000

 

 

Repayments on the Baltic Trading $148 Million Credit Facility

 

(2,447

)

 

Repayments on the 2010 Baltic Trading Credit Facility

 

(102,250

)

 

Repayments on the Baltic Trading $22 Million Term Loan Facility

 

(750

)

(750

)

Repayments on the Baltic Trading 2014 Term Loan Facilities

 

(700

)

 

Payment of dividend by subsidiary

 

 

(2,046

)

Cash settlement of non-accredited Note holders

 

(720

)

 

Payment of common stock issuance costs by subsidiary

 

 

(111

)

Payment of deferred financing costs

 

(4,271

)

(360

)

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

13,491

 

(11,640

)

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(21,766

)

(65,002

)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

83,414

 

122,722

 

Cash and cash equivalents at end of period

 

$

61,648

 

$

57,720

 

 

See accompanying notes to condensed consolidated financial statements.

 

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Table of Contents

 

Genco Shipping & Trading Limited

(U.S. Dollars in Thousands, Except Per Share and Share Data)

Notes to Condensed Consolidated Financial Statements (unaudited)

 

1 - GENERAL INFORMATION

 

The accompanying condensed consolidated financial statements include the accounts of Genco Shipping & Trading Limited (“GS&T”), its wholly-owned subsidiaries, and its subsidiary, Baltic Trading Limited (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 June 30, 2015, is the sole owner of all of the outstanding shares of the following subsidiaries: Genco Ship Management LLC; Genco Investments LLC; Genco RE Investments LLC; and the ship-owning subsidiaries as set forth below.  As of June 30, 2015, Genco Ship Management LLC is the sole owner of all of the outstanding shares of Genco Management (USA) Limited.  Additionally, as of June 30, 2015, GS&T is the sole owner of Poseidon Merger Sub Limited, a Marshall Islands corporation and an indirect wholly owned subsidiary of Genco.

 

Bankruptcy Filing

 

On April 21, 2014 (the “Petition Date”), GS&T and its subsidiaries other than Baltic Trading Limited (“Baltic Trading”) and its subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). The Debtors continued to operate their businesses in the ordinary course as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Through the Chapter 11 Cases, the Debtors implemented a Prepackaged Plan of Reorganization of the Debtors Pursuant to Chapter 11 of the Bankruptcy Code (the “Prepack Plan”) for which the Company solicited votes from certain classes of its creditors prior to commencement of the Chapter 11 Cases in accordance with the Restructuring Support Agreement that the Debtors entered into with certain of its creditors on April 3, 2014.  The Company subsequently emerged from bankruptcy on July 9, 2014 (the “Effective Date”).  Refer to the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2014, as amended, for further detail regarding the bankruptcy filing.

 

Financial Statement Presentation

 

Upon the Company’s emergence from the Chapter 11 Cases on July 9, 2014, the Company adopted fresh-start reporting in accordance with provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852, “Reorganizations” (“ASC 852”).  Upon adoption of fresh-start reporting, the Company’s assets and liabilities were recorded at their value as of the fresh-start reporting date.  The fair values of the Company’s assets and liabilities in conformance with ASC 805, “Business Combinations,” as of that date differed materially from the recorded values of its assets and liabilities as reflected in its historical consolidated financial statements.  In addition, the Company’s adoption of fresh-start reporting may materially affect its results of operations following the fresh-start reporting dates, as the Company will have a new basis in its assets and liabilities.  Consequently, the Company’s historical financial statements may not be reliable indicators of its financial condition and results of operations for any period after it adopted fresh-start reporting.  As a result of the adoption of fresh-start reporting, the Company’s consolidated balance sheets and consolidated statements of operations subsequent to July 9, 2014 will not be comparable in many respects to our consolidated balance sheets and consolidated statements of operations prior to July 9, 2014.  References to “Successor Company” refer to the Company after July 9, 2014, after giving effect to the application of fresh-start reporting.  References to “Predecessor Company” refer to the Company prior to July 9, 2014.

 

Merger Agreement with Baltic Trading

 

On April 7, 2015, the Company entered into a definitive merger agreement with 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.

 

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Table of Contents

 

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, Chairman of the Board of each company, recused for the vote.  The Merger was approved on July 17, 2015 at the 2015 Annual Meeting of Shareholders (the “Annual Meeting”).

 

The Company prepares its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the Company currently consolidates the operations of Baltic Trading. The Baltic Trading common shares that the Company will acquire in the Merger are currently recognized as a noncontrolling interest in the condensed 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 will be reflected as an adjustment to the equity in the Company. No gain or loss will be recognized in the Company’s Condensed Consolidated Statement of Comprehensive Income (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 owns 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 is to be guaranteed by the Company.  For further details, refer to the “Impairment of vessel 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 ASC 805, “Business Combinations”, 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 is reflected as an adjustment to Additional paid-in capital in the Condensed Consolidated Statements of Equity during the six months ended June 30, 2015.  The independent special committees of both companies’ Boards of Directors reviewed and approved these transactions.

 

Other General Information

 

Below is the list of GS&T’s wholly owned ship-owning subsidiaries as of June 30, 2015:

 

Wholly Owned Subsidiaries

 

Vessel Acquired

 

Dwt

 

Delivery Date

 

Year Built

 

 

 

 

 

 

 

 

 

Genco Reliance Limited

 

Genco Reliance

 

29,952

 

12/6/04

 

1999

Genco Vigour Limited

 

Genco Vigour

 

73,941

 

12/15/04

 

1999

Genco Explorer Limited

 

Genco Explorer

 

29,952

 

12/17/04

 

1999

Genco Carrier Limited

 

Genco Carrier

 

47,180

 

12/28/04

 

1998

Genco Sugar Limited

 

Genco Sugar

 

29,952

 

12/30/04

 

1998

Genco Pioneer Limited

 

Genco Pioneer

 

29,952

 

1/4/05

 

1999

Genco Progress Limited

 

Genco Progress

 

29,952

 

1/12/05

 

1999

Genco Wisdom Limited

 

Genco Wisdom

 

47,180

 

1/13/05

 

1997

Genco Success Limited

 

Genco Success

 

47,186

 

1/31/05

 

1997

Genco Beauty Limited

 

Genco Beauty

 

73,941

 

2/7/05

 

1999

Genco Knight Limited

 

Genco Knight

 

73,941

 

2/16/05

 

1999

Genco Leader Limited

 

Genco Leader

 

73,941

 

2/16/05

 

1999

Genco Marine Limited

 

Genco Marine

 

45,222

 

3/29/05

 

1996

Genco Prosperity Limited

 

Genco Prosperity

 

47,180

 

4/4/05

 

1997

Genco Muse Limited

 

Genco Muse

 

48,913

 

10/14/05

 

2001

Genco Acheron Limited

 

Genco Acheron

 

72,495

 

11/7/06

 

1999

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

 

169,694

 

12/29/08

 

2008

Genco Commodus Limited

 

Genco Commodus

 

169,025

 

7/22/09

 

2009

Genco Maximus Limited

 

Genco Maximus

 

169,025

 

9/18/09

 

2009

 

7



Table of Contents

 

Wholly Owned Subsidiaries

 

Vessel Acquired

 

Dwt

 

Delivery Date

 

Year Built

Genco Claudius Limited

 

Genco Claudius

 

169,025

 

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

 

57,981

 

8/31/10

 

2009

Genco Auvergne Limited

 

Genco Auvergne

 

57,981

 

8/16/10

 

2009

Genco Bourgogne Limited

 

Genco Bourgogne

 

57,981

 

8/24/10

 

2010

Genco Brittany Limited

 

Genco Brittany

 

57,981

 

9/23/10

 

2010

Genco Languedoc Limited

 

Genco Languedoc

 

57,981

 

9/29/10

 

2010

Genco Loire Limited

 

Genco Loire

 

53,416

 

8/4/10

 

2009

Genco Lorraine Limited

 

Genco Lorraine

 

53,416

 

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

 

57,981

 

8/10/10

 

2010

Genco Rhone Limited

 

Genco Rhone

 

58,018

 

3/29/11

 

2011

Baltic Lion Limited

 

Baltic Lion

 

179,185

 

4/8/2015 (1)

 

2012

Baltic Tiger Limited

 

Genco Tiger

 

179,185

 

4/8/2015 (1)

 

2011

 


(1)         The delivery date for these vessels represents the date that the vessel was delivered from Baltic Trading to the Company.

 

Baltic Trading Limited was a wholly-owned indirect subsidiary of GS&T until Baltic Trading completed its initial public offering, or IPO, on March 15, 2010.  As of June 30, 2015 and December 31, 2014, Genco Investments LLC owned 6,356,471 shares of Baltic Trading’s Class B Stock, which represented a 10.85% ownership interest in Baltic Trading and 64.60% of the aggregate voting power of Baltic Trading’s outstanding shares of voting stock.  As a result of the Merger, Baltic Trading once again became a wholly-owned indirect subsidiary of GS&T.

 

Below is the list of Baltic Trading’s wholly owned ship-owning subsidiaries as of June 30, 2015:

 

Baltic Trading’s Wholly Owned
Subsidiaries

 

Vessel Acquired

 

Dwt

 

Delivery Date

 

Year
Built

 

 

 

 

 

 

 

 

 

Baltic Leopard Limited

 

Baltic Leopard

 

53,447

 

4/8/10

 

2009

Baltic Panther Limited

 

Baltic Panther

 

53,351

 

4/29/10

 

2009

Baltic Cougar Limited

 

Baltic Cougar

 

53,432

 

5/28/10

 

2009

Baltic Jaguar Limited

 

Baltic Jaguar

 

53,474

 

5/14/10

 

2009

Baltic Bear Limited

 

Baltic Bear

 

177,717

 

5/14/10

 

2010

Baltic Wolf Limited

 

Baltic Wolf

 

177,752

 

10/14/10

 

2010

Baltic Wind Limited

 

Baltic Wind

 

34,409

 

8/4/10

 

2009

Baltic Cove Limited

 

Baltic Cove

 

34,403

 

8/23/10

 

2010

Baltic Breeze Limited

 

Baltic Breeze

 

34,386

 

10/12/10

 

2010

Baltic Fox Limited

 

Baltic Fox

 

31,883

 

9/6/13

 

2010

Baltic Hare Limited

 

Baltic Hare

 

31,887

 

9/5/13

 

2009

Baltic Hornet Limited

 

Baltic Hornet

 

63,574

 

10/29/2014

 

2014

Baltic Wasp Limited

 

Baltic Wasp

 

63,389

 

1/2/2015

 

2015

Baltic Scorpion Limited

 

Baltic Scorpion

 

63,462

 

8/6/2015

 

2015

Baltic Mantis Limited

 

Baltic Mantis

 

64,000

 

Q3 2015 (1)

 

2015 (1)

 


(1)         Built dates and delivery dates for vessels being delivered in the future are estimates based on the guidance received from the sellers and the respective shipyards.

 

8



Table of Contents

 

The Company provides technical services for drybulk vessels purchased by Maritime Equity Partners LLC (“MEP”).  Peter C. Georgiopoulos, Chairman of the Board of Directors of GS&T, controls and has a minority interest in MEP.  These services include oversight of crew management, insurance, drydocking, ship operations and financial statement preparation, but do not include chartering services.  The services are 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.  MEP has the right to cancel provision of services on 60 days’ notice with payment of a one-year termination fee upon a change in control of the Company.  The Company may terminate provision of the services at any time on 60 days’ notice.

 

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of consolidation

 

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP, which include the accounts of GS&T, its wholly-owned subsidiaries and Baltic Trading, a subsidiary in which the Company owns a majority of the voting interests and exercises control.  All intercompany accounts and transactions have been eliminated in consolidation.

 

Basis of presentation

 

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”).  In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and operating results have been included in the statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.  These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2014, as amended (the “2014 10-K”).  The results of operations for the three and six month periods ended June 30, 2015 and 2014 for the Successor Company and Predecessor Company, respectively, are not necessarily indicative of the operating results for the full year.

 

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 which 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 Successor Company and the Predecessor Company for the three months ended June 30, 2015 and 2014 was $18,730 and $34,557, respectively.  Depreciation expense for vessels for the Successor Company and the Predecessor Company for the six months ended June 30, 2015 and 2014 was $37,697 and $68,717, 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 cost of steel times the weight of the ship noted in lightweight tons (lwt).  Effective July 9, 2014, the Company increased the estimated scrap value of the vessels from $245 per lwt to $310 per lwt prospectively based on the 15-year average scrap value of steel.  During the three and six months ended June 30, 2015, the increase in the estimated scrap value resulted in a decrease in depreciation expense of $796 and $1,583, respectively. The decrease in depreciation expense resulted in a $0.01 and $0.02 change to the basic and diluted net loss per share during the three and six months ended June 30, 2015, respectively.  The basic and diluted net loss per share would have been ($0.68) and ($1.32) per share during the three and six months ended June 30, 2015, respectively, if there were no change in the estimated scrap value.

 

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. As of June 30, 2015 and December 31, 2014, the Company had an accrual of $829 and $662, respectively, related to these estimated customer claims.

 

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Table of Contents

 

Voyage expense recognition

 

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. 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. These differences in bunkers resulted in a net loss (gain) of $1,206 and ($184) during the three months ended June 30, 2015 and 2014 for the Successor Company and Predecessor Company, respectively, and $2,660 and ($249) during the six months ended June 30, 2015 and 2014 for the Successor Company and Predecessor Company, respectively.  Additionally, voyage expenses include the cost of bunkers consumed during short-term time charters pursuant to the terms of the time charter agreement, as well as any adjustments to record fuel inventory at the lower of cost or market at the balance sheet date.

 

Impairment of vessel assets

 

During the three and six months ended June 30, 2015, the Successor Company recorded $0 and $35,396, respectively, related to the impairment of vessel assets in accordance with ASC 360 — “Property, Plant and Equipment” (“ASC 360”).  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, 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.  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.

 

Loss on disposal of vessels

 

During the three and six months ended June 30, 2015, the Successor Company recorded $1,210 related to the loss on sale of vessels related to the sale of the Baltic Lion and Baltic Tiger entities to GS&T from Baltic Trading on April 8, 2015.

 

Noncontrolling interest

 

Net loss attributable to noncontrolling interest during the three and six months ended June 30, 2015 and 2014 reflects the noncontrolling interest’s share of the net loss of Baltic Trading, a subsidiary of the Company, which owns and employs drybulk vessels in the spot market, in vessel pools or on spot market-related time charters.  The spot market represents immediate chartering of a vessel, usually for single voyages.  At June 30, 2015 and December 31, 2014, the noncontrolling interest held an 89.15% economic interest in Baltic Trading while only holding 35.40% of the voting power.

 

Income taxes

 

Pursuant to certain agreements, GS&T technically and commercially manages vessels for Baltic Trading, as well as provides technical management of vessels for MEP in exchange for specified fees for these services provided.  These services are performed by Genco Management (USA) Limited (“Genco (USA)”), which has elected to be taxed as a corporation for United States federal income tax purposes.  As such, Genco (USA) is subject to United States federal income tax 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 the services for both Baltic Trading and MEP’s vessels.

 

Total revenue earned by the Successor Company for these services during the three months ended June 30, 2015 was $2,490 of which $1,671 eliminated upon consolidation.  After allocation of certain expenses, there was taxable income of $1,532 associated with these activities for the three months ended June 30, 2015.  This resulted in estimated tax expense of $711 for the three months ended June 30, 2015.  Total revenue earned by the Predecessor Company for these services during the three months ended June 30, 2014 was $1,841 of which $1,022 eliminated upon consolidation.  After allocation of certain expenses, there was taxable income of $764 associated with these activities for the three months ended June 30, 2014.  This resulted in estimated tax expense of $339 for the three months ended June 30, 2014.

 

Total revenue earned by the Successor Company for these services during the six months ended June 30, 2015 was $4,680 of which $3,051 eliminated upon consolidation.  After allocation of certain expenses, there was taxable income of $2,730 associated with these activities for the six months ended June 30, 2015.  This resulted in estimated tax expense of $1,229 for the six months ended

 

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Table of Contents

 

June 30, 2015.  Total revenue earned by the Predecessor Company for these services during the six months ended June 30, 2014 was $3,696 of which $2,067 eliminated upon consolidation.  After allocation of certain expenses, there was taxable income of $1,650 associated with these activities for the six months ended June 30, 2014.  This resulted in estimated tax expense of $740 for the six months ended June 30, 2014.

 

Baltic Trading is subject to income tax on its United States source income.  During the three months ended June 30, 2015 and 2014, Baltic Trading had United States operations that resulted in United States source income of $178 and $623, respectively.  Baltic Trading’s estimated United States income tax expense for the three months ended June 30, 2015 and 2014 was $7 and $25, respectively.

 

Baltic Trading is subject to income tax on its United States source income.  During the six months ended June 30, 2015 and 2014, Baltic Trading had United States operations that resulted in United States source income of $765 and $907, respectively.  Baltic Trading’s estimated United States income tax expense for the six months ended June 30, 2015 and 2014 was $31 and $37, respectively.

 

Recent accounting pronouncements

 

In April 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”), which requires debt issuance costs to be presented in the balance sheet as a direct deduction from the associated debt liability.  This guidance is not applicable to revolving debt arrangements. ASU 2015-03 will not change the amortization of debt issuance costs, which will continue to follow the existing accounting guidance. ASU 2015-03 will be effective for interim and annual reporting periods beginning after December 15, 2015. Early application is permitted. The Company is currently evaluating the impact of the adoption of ASU 2015-03 on its condensed consolidated financial statements.

 

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, 2016, 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.

 

On July 9, 2015, the FASB voted to defer the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date.  The FASB also permitted early adoption of the standard, but not before the original effective date of December 15, 2016.  The Company is evaluating the potential impact of this adoption on its condensed consolidated financial statements.

 

3 - SEGMENT INFORMATION

 

The Company determines its operating segments based on the information utilized by the chief operating decision maker to assess performance and make decisions about allocating the Company’s resources.  Based on this information, the Company has two reportable operating segments, GS&T and Baltic Trading.  Both GS&T and Baltic Trading are engaged in the ocean transportation of drybulk cargoes worldwide through the ownership and operation of drybulk carrier vessels.  GS&T and Baltic Trading seek to deploy their vessels on time charters, spot market-related time charters or in vessel pools trading in the spot market.  Segment results are evaluated based on net (loss) income.  The accounting policies applied to the reportable segments are the same as those used in the preparation of the Company’s condensed consolidated financial statements.  As a result of the adoption of fresh-start reporting on the Effective Date, the cost basis for certain of Baltic Trading’s assets were revalued and are reflected in the Baltic Trading balances in the segment information reported below.

 

The following table presents a reconciliation of total voyage revenue from external (third party) customers for the Company’s two operating segments to total consolidated voyage revenue from external customers for the Company for the three and six months ended June 30, 2015 and 2014.

 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 

Successor

 

Predecessor

 

Successor

 

Predecessor

 

Voyage revenue from external customers

 

2015

 

2014

 

2015

 

2014

 

GS&T

 

$

26,959

 

$

40,842

 

$

53,656

 

$

90,931

 

Baltic Trading

 

6,813

 

10,703

 

13,725

 

23,794

 

Total operating segments

 

33,772

 

51,545

 

67,381

 

114,725

 

Eliminating revenue

 

 

 

 

 

Total consolidated voyage revenue from external customers

 

$

33,772

 

$

51,545

 

$

67,381

 

$

114,725

 

 

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The following table presents a reconciliation of total intersegment revenue, which eliminates upon consolidation, for the Company’s two operating segments for the three and six months ended June 30, 2015 and 2014. The intersegment revenue noted in the following table represents revenue earned by GS&T pursuant to the management agreement entered into with Baltic Trading, which includes commercial service fees, technical service fees and sale and purchase fees, if any.

 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 

Successor

 

Predecessor

 

Successor

 

Predecessor

 

Intersegment revenue

 

2015

 

2014

 

2015

 

2014

 

GS&T

 

$

1,671

 

$

1,022

 

$

3,051

 

$

2,067

 

Baltic Trading

 

 

 

 

 

Total operating segments

 

1,671

 

1,022

 

3,051

 

2,067

 

Eliminating revenue

 

(1,671

)

(1,022

)

(3,051

)

(2,067

)

Total consolidated intersegment revenue

 

$

 

$

 

$

 

$

 

 

The following table presents a reconciliation of total net loss for the Company’s two operating segments to total consolidated net loss for the three and six months ended June 30, 2015 and 2014. The eliminating net (income) loss noted in the following table consists of the elimination of intercompany transactions between GS&T and Baltic Trading, as well as dividends received by GS&T from Baltic Trading for its Class B shares of Baltic Trading, if applicable.

 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 

Successor

 

Predecessor

 

Successor

 

Predecessor

 

Net loss

 

2015

 

2014

 

2015

 

2014

 

GS&T

 

$

(38,870

)

$

(59,874

)

$

(71,898

)

$

(98,444

)

Baltic Trading

 

(13,088

)

(5,674

)

(58,899

)

(9,207

)

Total operating segments

 

(51,958

)

(65,548

)

(130,797

)

(107,651

)

Eliminating net (income) loss

 

(6

)

9

 

269

 

145

 

Total consolidated net loss

 

$

(51,952

)

$

(65,557

)

$

(131,066

)

$

(107,796

)

 

The following table presents a reconciliation of total assets for the Company’s two operating segments to total consolidated assets as of June 30, 2015 and December 31, 2014. The eliminating assets noted in the following table consist of the elimination of intercompany transactions resulting from the capitalization of fees paid to GS&T by Baltic Trading as vessel assets, including related accumulated depreciation, as well as the outstanding receivable balance due to GS&T from Baltic Trading as of June 30, 2015 and December 31, 2014.

 

 

 

Successor

 

Successor

 

Total assets

 

June 30,
2015

 

December 31,
2014

 

GS&T

 

$

1,277,313

 

$

1,270,923

 

Baltic Trading

 

394,375

 

482,415

 

Total operating segments

 

1,671,688

 

1,753,338

 

Eliminating assets

 

(2,088

)

(425

)

Total consolidated assets

 

$

1,669,600

 

$

1,752,913

 

 

4 - CASH FLOW INFORMATION

 

For the six months ended June 30, 2015, the Successor Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $673

 

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for the Purchase of vessels, including deposits and $102 for the Purchase of other fixed assets.  Additionally, for the six months ended June 30, 2015, the Successor Company had non-cash financing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $47 associated with the Payment of deferred financing fees. Lastly, for the six months ended June 30, 2015, the Successor Company had non-cash financing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $111 associated with the Cash settlement of non-accredited Note holders.  During the six months ended June 30, 2015, the Successor Company increased the estimated amount of non-accredited holders of the Convertible Senior Notes, which was discharged on the Effective Date, that are expected to be settled in cash versus settled with common shares.

 

Professional fees and trustee fees in the amount of $833 were recognized by the Successor Company in Reorganization items, net for the six months ended June 30, 2015 (refer to Note 19).  During this period, $947 of professional fees and trustee fees were paid through June 30, 2015 and $198 is included in Accounts payable and accrued expenses as of June 30, 2015.

 

For the six months ended June 30, 2014, the Predecessor Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Accounts payable and accrued expenses consisting of $250 for the Purchase of vessels, including deposits and $43 for the Purchase of other fixed assets.  For the six months ended June 30, 2014, the Predecessor Company had non-cash investing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Prepaid expenses and other current assets consisting of $20 associated with the Purchase of other fixed assets.  Additionally, for the six months ended June 30, 2014, the Company had non-cash financing activities not included in the Condensed Consolidated Statement of Cash Flows for items included in Liabilities subject to compromise consisting of $13,199 associated with the Payment of deferred financing fees.

 

Of the $20,106 of Reorganization items, net for the six months ended June 30, 2014 (refer to Note 19), $1,204 was paid through June 30, 2014 and $18,902 is included in Accounts payable and accrued expenses as of June 30, 2014.

 

During the six months ended June 30, 2015, the Successor Company made a reclassification of $9,694 from Deposits on vessels to Vessels, net of accumulated depreciation, due to the completion of the purchase of Baltic Wasp. No such reclassifications were made during the six months ended June 30, 2014.

 

During the six months ended June 30, 2014, the Predecessor Company made a reclassification of $984 from Fixed assets, net of accumulated depreciation, to Vessels, net of accumulated depreciation, for items that should be capitalized and depreciated over the remaining life of the respective vessels.

 

During the six months ended June 30, 2015 and 2014, cash paid for interest by the Successor Company and the Predecessor Company, net of amounts capitalized, and including bond coupon interest paid during the six months ended June 30, 2014, was $6,940 and $38,238, respectively.

 

During the six months ended June 30, 2015 and 2014, cash paid for estimated income taxes by the Successor Company and Predecessor Company was $1,369 and $1,495, respectively.

 

5 - VESSEL ACQUISITIONS

 

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 are to be renamed the Baltic Mantis and the Baltic Scorpion. The purchases are subject to completion of customary additional documentation and closing conditions. 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 was delivered to the Company on August 6, 2015, and the Baltic Mantis is expected to be delivered during the third quarter of 2015. As of June 30, 2015 and December 31, 2014, deposits on vessels were $19,926 and $25,593, respectively.  The Company intends to use a combination of cash on hand, future cash flow from operations as well as debt or equity financing, including the Baltic Trading $148 Million Credit Facility as described in Note 9 — Debt, to fully finance the acquisition of the remaining two 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 Condensed Consolidated Balance Sheets as of December 31, 2014 as the payment was held in an escrow account and was released to the seller when the vessel was delivered to Baltic Trading on January 2, 2015.

 

Refer to Note 1 — General Information for a listing of the vessel delivery dates for the vessels in the Company’s fleet and the estimated delivery dates for vessels that Baltic Trading has entered into agreements to purchase.

 

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Below market time charters, including those acquired during previous periods, were amortized as an increase to voyage revenue in the amount of $18 and $67 by the Predecessor Company during the three and six months ended June 30, 2014, respectively.  The remaining unamortized fair market value of Time charters acquired at December 31, 2014 was $0.  As part of fresh-start reporting, the remaining liability for below market time charters was written-off during the re-valuation of our liabilities.

 

Capitalized interest expense associated with the newbuilding contracts entered into by Baltic Trading recorded by the Successor Company and the Predecessor Company for the three months ended June 30, 2015 and 2014 was $139 and $177, respectively, and $263 and $276 for the six months ended June 30, 2015 and 2014, respectively.

 

6 - INVESTMENTS

 

The Company holds an investment in the capital stock of Jinhui Shipping and Transportation Limited (“Jinhui”) and 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 that operates a fleet of carriers which includes carriers for iron ore, liquefied natural gas and tankers for oil and petroleum products.  These investments are designated as Available For Sale (“AFS”) and are reported at fair value, with unrealized gains and losses recorded in equity as a component of accumulated other comprehensive income (loss) (“AOCI”).  At June 30, 2015 and December 31, 2014, the Company held 16,335,100 shares of Jinhui capital stock which is recorded at its fair value of $25,377 and $26,414, respectively, based on the last closing price during each respective quarter on June 30, 2015 and December 30, 2014, respectively.  At June 30, 2015 and December 31, 2014, the Company held 3,355 shares of KLC stock which is recorded at its fair value of $66 and $72, respectively, based on the last closing price during each respective quarter on June 30, 2015 and December 30, 2014.

 

The Company reviews the investment in Jinhui and KLC for impairment on a quarterly basis.  There were no impairment charges recognized for the three and six months ended June 30, 2015 and 2014.

 

The unrealized gain (losses) on the Jinhui capital stock and KLC stock are a component of AOCI since these investments are designated as AFS securities.  As part of fresh-start reporting, the Company revised its cost basis for its investments in Jinhui and KLC based on their fair values on the Effective Date.

 

Refer to Note 12 — Accumulated Other Comprehensive Income (Loss) for a breakdown of the components of AOCI.

 

7 — NET LOSS PER COMMON SHARE

 

The computation of basic net loss per share is based on the weighted-average number of common shares outstanding during the year. The computation of diluted net loss per share assumes the vesting of nonvested stock awards (refer to Note 21 — 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 1,110,600 nonvested shares outstanding at June 30, 2015 (refer to Note 21 — Stock-Based Compensation), all are anti-dilutive.  The Successor Company’s diluted net loss per share will also reflect the assumed conversion of the equity warrants issued on the Effective Date and MIP Warrants issued by the Successor Company (refer to Note 21 — Stock-Based Compensation) if the impact is dilutive under the treasury stock method.  The Predecessor Company’s diluted net loss per share will also reflect the assumed conversion under the Predecessor Company’s convertible debt if the impact is dilutive under the “if converted” method. The impact of the shares convertible under the Predecessor Company’s convertible notes is excluded from the computation of diluted earnings per share when interest expense per common share obtainable upon conversion is greater than basic earnings per share.

 

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

 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 

Successor

 

Predecessor

 

Successor

 

Predecessor

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding, basic:

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic

 

60,487,189

 

43,568,942

 

60,459,145

 

43,568,942

 

 

 

 

 

 

 

 

 

 

 

Common shares outstanding, diluted:

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, basic

 

60,487,189

 

43,568,942

 

60,459,145

 

43,568,942

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of convertible notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of restricted stock awards

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding, diluted

 

60,487,189

 

43,568,942

 

60,459,145

 

43,568,942

 

 

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The following table sets forth a reconciliation of the net loss attributable to GS&T and the net loss attributable to GS&T for diluted net loss per share under the “if-converted” method:

 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 

Successor

 

Predecessor

 

Successor

 

Predecessor

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to GS&T

 

$

(40,332

)

$

(60,524

)

$

(78,773

)

$

(99,630

)

 

 

 

 

 

 

 

 

 

 

Interest expense related to convertible notes, if dilutive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to GS&T for the computation of diluted net loss per share

 

$

(40,332

)

$

(60,524

)

$

(78,773

)

$

(99,630

)

 

8 - RELATED PARTY TRANSACTIONS

 

The following represent related party transactions reflected in these condensed consolidated financial statements:

 

Until December 31, 2014, the Company made available employees performing internal audit services to Gener8 Maritime, Inc., formerly General Maritime Corporation (“Gener8”), where the Company’s Chairman, Peter C. Georgiopoulos, also serves as Chairman of the Board.  For the six months ended June 30, 2014, the Predecessor Company invoiced $72 to Gener8, which includes time associated with such internal audit services and other expenditures.  Additionally, during the six months ended June 30, 2015 and 2014, the Successor Company and Predecessor Company incurred travel and other office related expenditures totaling $53 and $49, respectively, reimbursable to Gener8 or its service provider.  At June 30, 2015 and December 31, 2014, the amount due to Gener8 from the Company was $8 and $41, respectively.

 

During the six months ended June 30, 2015 and 2014, the Successor Company and Predecessor Company incurred legal services (primarily in connection with vessel acquisitions) aggregating $8 and $3, respectively, from Constantine Georgiopoulos, the father of Peter C. Georgiopoulos, Chairman of the Board.  At June 30, 2015 and December 31, 2014, the amount due to Constantine Georgiopoulos was $2 and $9, respectively.

 

GS&T and Baltic Trading have entered into agreements with Aegean Marine Petroleum Network, Inc. (“Aegean”) to purchase lubricating oils for certain vessels in their fleets.  Peter C. Georgiopoulos, Chairman of the Board of the Company, is Chairman of the Board of Aegean.  During the six months ended June 30, 2015 and 2014, Aegean supplied lubricating oils to the Successor Company and Predecessor Company’s vessels aggregating $663 and $1,087, respectively.  At June 30, 2015 and December 31, 2014, $287 and $267 remained outstanding, respectively.

 

During the six months ended June 30, 2015 and 2014, the Successor Company and Predecessor Company invoiced MEP for technical services provided and expenses paid on MEP’s behalf aggregating $1,596 and $1,671, respectively.  Peter C. Georgiopoulos, Chairman of the Board, controls and has a minority interest in MEP.  At June 30, 2015 and December 31, 2014, $1,311 and $10, respectively, was due to the Company from MEP.  Total service revenue earned by the Successor Company and the Predecessor Company for technical service provided to MEP for the six months ended June 30, 2015 and 2014 was $1,629 and $1,629, respectively.

 

9 - DEBT

 

Long-term debt consists of the following:

 

 

 

Successor

 

Successor

 

 

 

June 30, 2015

 

December 31, 2014

 

 

 

 

 

 

 

$100 Million Term Loan Facility

 

$

63,946

 

$

67,792

 

$253 Million Term Loan Facility

 

155,418

 

165,568

 

$44 Million Term Loan Facility

 

39,875

 

41,250

 

2015 Revolving Credit Facility

 

25,000

 

 

2010 Baltic Trading Credit Facility

 

 

102,250

 

Baltic Trading $148 Million Credit Facility

 

112,553

 

 

Baltic Trading $22 Million Term Loan Facility

 

19,375

 

20,125

 

2014 Baltic Trading Term Loan Facilities

 

32,450

 

33,150

 

Less: Current portion

 

(44,792

)

(34,324

)

 

 

 

 

 

 

Long-term debt

 

$

403,825

 

$

395,811

 

 

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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 Baltic Trading $22 Million Term Loan Facility (as defined below), 2014 Baltic Trading Term Loan Facilities (as defined below) and the Baltic Trading $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 existing covenants measuring collateral maintenance under the 2014 Baltic Trading 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 existing covenant measuring collateral maintenance under the Baltic Trading $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 Baltic Trading $148 Million Credit Facility, the existing 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 shall be increased to 140% at the time of funding of the term loan for the Baltic Scorpion on August 3, 2015.  Refer to Note 23 — Subsequent events.

 

·                  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 Baltic Trading $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 Genco (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 Genco 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.

 

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On July 17, 2015, when the Merger was completed, the Company executed a guaranty of the obligations of the borrowers under each of the Facilities.  The execution of the guarantees, together with certain other items that were previously delivered, satisfied all conditions to the effectiveness of all provisions of the Amendment and Consent Agreements.

 

$100 Million Term Loan Facility

 

On August 12, 2010, the Company entered into the $100 Million Term Loan Facility. As of June 30, 2015, the Company has utilized its maximum borrowing capacity of $100,000. The Company has used the $100 Million Term Loan Facility to fund or refund the Company a portion of the purchase price of the acquisition of five vessels from companies within the Metrostar group of companies.  As of June 30, 2015, there was no availability under the $100 Million Term Loan Facility.  At June 30, 2015 and December 31, 2014, the total outstanding debt balance was $63,946 and $67,792, respectively.

 

Pursuant to the amendments to the $100 Million Term Loan Facility that were entered into on December 21, 2011 and certain agreements we entered into in August 2012 to further amend our credit facilities (the “August 2012 Agreements”), the maximum leverage ratio covenant and the minimum permitted consolidated interest ratio covenant were waived for the periods ending on and including December 31, 2013.

 

On the Effective Date, the Company entered into the Amended and Restated $100 Million Term Loan Facility and the Amended and Restated $253 Million Term Loan Facility.  The Amended and Restated Credit Facilities included, among other things:

 

·                  A paydown as of the Effective Date with respect to payments which became due under the prepetition credit facilities between the Petition Date and the Effective Date and were not paid during the pendency of the Chapter 11 Cases ($1,923 for the $100 Million Term Loan Facility and $5,075 for the $253 Million Term Loan Facility).

 

·                  Extension of the maturity dates to August 31, 2019 from August 17, 2017 for the $100 Million Term Loan Facility and August 15, 2015 for the $253 Million Term Loan Facility.

 

·                  Relief from compliance with financial covenants governing the Company’s maximum leverage ratio, minimum consolidated interest coverage ratio and consolidated net worth through and including the quarter ending March 31, 2015 (with quarterly testing commencing June 30, 2015).

 

·                  A fleetwide minimum liquidity covenant requiring maintenance of cash of $750 per vessel for all vessels owned by the Company (excluding those owned by Baltic Trading).

 

·                  An increase in the interest rate to LIBOR plus 3.50% per year from 3.00% previously for the $100 Million Term Loan Facility and the $253 Million Term Loan Facility.

 

The obligations under the Amended and Restated $100 Million Term Loan Facility are secured by a first priority security interest in the vessels and other collateral securing the $100 Million Term Loan Facility.  The Amended and Restated $100 Million Term Loan Facility requires quarterly repayment installments in accordance with the original terms of the $100 Million Term Loan Facility.

 

On April 30, 2015, the Company entered into agreements to amend or waive certain provisions under the $100 Million Term Loan Facility and the $253 Million Term Loan Facility (the “April 2015 Amendments”) which implemented the following, among other things:

 

·                  The existing covenant measuring the Company’s ratio of net debt to EBITDA was replaced with a covenant requiring its ratio of total debt outstanding to value adjusted total assets (total assets adjusted for the difference between book value and market value of fleet vessels) to be less than 70%.

 

·                  Measurement of the interest coverage ratio under each facility is waived through and including December 31, 2016.

 

·                  The fleetwide minimum liquidity covenant was amended to allow up to 50% of the required amount of $750 per vessel in cash to be satisfied with undrawn working capital lines with a remaining availability period of more than six months.

 

·                  The Company agreed to grant additional security for its obligation under the $253 Million Term Loan Facility consisting of four of the Company’s vessels, the Genco Thunder, the Genco Raptor, the Genco Muse and the Genco Challenger and related collateral.

 

Consenting lenders under the $100 Million Term Loan Facility and the $253 Million Term Loan Facility received an upfront

 

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fee of $165 and $350, respectively, related to the April 2015 Amendments.

 

As of June 30, 2015, the Company believes it is in compliance with all of the financial covenants under the $100 Million Term Loan Facility, as amended.

 

Following the procurement of updated valuations in February 2015, the Company was not in compliance with the collateral maintenance test of a ratio of 130%. The collateral measurement was 122.4%, representing an approximate shortfall of $5,150.  Under the terms of the credit facility the Company would need to cover such shortfall within 30 days from the time it is notified by the agent.  The Company was not notified by the agent to take any remedial actions, However, on April 24, 2015, the Company added one of its unencumbered Handysize vessels, the Genco Sugar, as additional collateral to cover the shortfall and satisfy the collateral maintenance test.  The next date that valuations under this credit facility will be required is on or around August 17, 2015.

 

$253 Million Term Loan Facility

 

On August 20, 2010, the Company entered into the $253 Million Term Loan Facility.  As of June 30, 2015, the Company has utilized its maximum borrowing capacity of $253,000 to fund or refund to the Company a portion of the purchase price of the 13 vessels purchased from Bourbon SA during the third quarter of 2010 and first quarter of 2011.  As of June 30, 2015, there was no availability under the $253 Million Term Loan Facility.  At June 30, 2015 and December 31, 2014, the total outstanding debt balance was $155,418 and $165,568, respectively.

 

Pursuant to the amendment to the $253 Million Term Loan Facility that was entered into on December 21, 2011 and the August 2012 Agreements, the maximum leverage ratio covenant and the minimum permitted consolidated interest ratio covenant were waived for the periods ending on and including December 31, 2013.

 

As of June 30, 2015 and December 31, 2014, the Company has deposited $9,750 that has been reflected as Restricted cash.  Restricted cash will be released only if the underlying collateral is sold or disposed of.

 

Refer to the “$100 Million Term Loan Facility” section above for a description of the Amended and Restated $253 Million Term Loan Facility that was entered into by the Company on the Effective Date as well as a description of the April 2015 Amendments that were entered into by the Company on April 30, 2015. The obligations under the Amended and Restated $253 Million Term Loan Facility are secured by a first priority security interest in the vessels and other collateral securing the $253 Million Term Loan Facility. The Amended and Restated $253 Million Term Loan Facility requires quarterly repayment installments in accordance with the original terms of the $253 Million Term Loan Facility.

 

As of June 30, 2015, the Company believes it is in compliance with all of the financial covenants under the Amended and Restated $253 Million Term Loan Facility, except for the 135% collateral maintenance test.  The actual percentage measured by the Company was 129.2% at June 30, 2015, including the additional collateral as described below, and 133.5% on July 9, 2015 following the Company’s scheduled amortization payment of $5,075.  Under the terms of the credit facility, the Company would need to remedy such shortfall within 30 days from the time it is requested by the agent.  During July 2015, the Company added five of its unencumbered vessels, the Genco Thunder, the Genco Raptor, the Genco Challenger, the Genco Reliance and the Genco Explorer, as additional collateral under this facility. In order to maintain compliance with the collateral maintenance test, the Company has also been in communication with the facility’s agent and prepaid $1,650 of the outstanding indebtedness on July 29, 2015, which the lenders have agreed will reduce the scheduled amortization payment of $5,075 that will be due in October 2015.

 

$44 Million Term Loan Facility

 

On December 3, 2013, Baltic Tiger Limited and Baltic Lion Limited, wholly-owned subsidiaries of Baltic Trading, entered into a secured loan agreement with DVB Bank SE for a term loan facility of up to $44,000 (the “$44 Million Term Loan Facility”). Amounts borrowed and repaid under the $44 Million Term Loan Facility may not be reborrowed.  The $44 Million Term Loan Facility has a maturity date of the sixth anniversary of the drawdown date for borrowings for the second vessel to be purchased, or December 23, 2019.  Borrowings under the $44 Million Term Loan Facility bear interest at the three-month LIBOR rate plus an applicable margin of 3.35% per annum. A commitment fee of 0.75% per annum is payable on the unused daily portion of the credit facility, which began accruing on December 3, 2013 and ended on December 23, 2013, the date which the entire $44,000 was borrowed.  Borrowings are to be repaid in 23 quarterly installments of $688 each commencing three months after the last drawdown date, or March 24, 2014, and a final payment of $28,188 due on the maturity date.

 

Borrowings under the $44 Million Term Loan Facility are to be secured by liens on the Company’s vessels to be financed or refinanced with borrowings under the facility, namely the Baltic Tiger and the Baltic Lion, and other related assets. Upon the prepayment of $18,000 plus any additional amounts necessary to maintain compliance with the collateral maintenance covenant, Baltic Trading may have the lien on the Baltic Tiger released. Under a Guarantee and Indemnity entered into concurrently with the

 

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$44 Million Term Loan Facility, Baltic Trading agreed to guarantee the obligations of its subsidiaries under the $44 Million Term Loan Facility.

 

On December 23, 2013, Baltic Tiger Limited and Baltic Lion Limited made drawdowns of $21,400 and $22,600 for the Baltic Tiger and Baltic Lion, respectively.  As of June 30, 2015, the Company has utilized its maximum borrowing capacity of $44,000 and there was no further availability.  At June 30, 2015 and December 31, 2014, the total outstanding debt balance was $39,875 and $41,250, respectively.

 

As of June 30, 2015, the Company believes it is in compliance with all of the financial covenants under the $44 Million Term Loan Facility.

 

On April 8, 2015, the Company acquired the entities owning the Baltic Lion and Baltic Tiger and succeeded Baltic Trading as the guarantor of the outstanding debt under the $44 Million Term Loan Facility.  Refer to Note 1 — General Information for further information regarding the sale of these entities to the Company.

 

2015 Revolving Credit Facility

 

On April 7, 2015, the Company’s wholly-owned subsidiaries, Genco Commodus Limited, Genco Maximus Limited, Genco Claudius Limited, Genco Hunter Limited and Genco Warrior Limited (collectively, the “Subsidiaries”) entered into a loan agreement by and among the Subsidiaries, as borrowers, ABN AMRO Capital USA LLC, as arranger, facility agent, security agent, and as lender, providing for a $59,500 revolving credit facility, with an uncommitted accordion feature that, if exercised, will upsize the facility up to $150,000 (the “2015 Revolving Credit Facility”).  On April 7, 2015, the Company entered into a guarantee of the obligations of the Subsidiaries under the 2015 Revolving Credit Facility, in favor of ABN AMRO Capital USA LLC.

 

Borrowings under the 2015 Revolving Credit Facility will be used for general corporate purposes including “working capital” (as defined in the 2015 Revolving Credit Facility) and to finance the purchase of drybulk vessels.  The 2015 Revolving Credit Facility has a maturity date of April 7, 2020.  Borrowings under the 2015 Revolving Credit Facility bear interest at LIBOR plus a margin based on a combination of utilization levels under the 2015 Revolving Credit Facility and a security maintenance cover ranging from 3.40% per annum to 4.25% per annum.  The commitment under the 2015 Revolving Credit Facility is subject to quarterly reductions of $1,641 to $4,137 depending on the total amount committed.  Borrowings under the 2015 Revolving Credit Facility are subject to 20 equal consecutive quarterly installment repayments commencing three months after the date of the loan agreement, or July 7, 2015.  A commitment fee of 1.5% per annum is payable on the undrawn amount of the maximum loan amount.

 

Borrowings under the 2015 Revolving Credit Facility are to be secured by liens on each of the Subsidiaries’ respective vessels; specifically, the Genco Commodus, Genco Maximus, Genco Claudius, Genco Hunter and Genco Warrior and other related assets.  Should the accordion feature be exercised, the 2015 Revolving Credit Facility will also be secured by up to six additional Capesize vessels and two additional Supramax vessels owned by other subsidiaries of the Company and other related assets.

 

The 2015 Revolving Credit Facility requires the Subsidiaries to comply with a number of customary covenants including financial covenants related to collateral maintenance, liquidity, leverage, debt service reserve and dividend restrictions.

 

On April 8, 2015, the Company drew down $25,000 on the 2015 Revolving Credit Facility for working capital purposes and to partially fund the purchase of the Baltic Lion and Baltic Tiger from Baltic Trading.  At June 30, 2015 and December 31, 2014, the total outstanding debt balance was $25,000 and $0, respectively. Additionally, on July 10, 2015, the Company drew down $10,000 on the 2015 Revolving Credit Facility for working capital purposes.

 

As of June 30, 2015, the Company believes it is in compliance with all of the financial covenants under the 2015 Revolving Credit Facility.

 

2010 Baltic Trading Credit Facility

 

On April 16, 2010, Baltic Trading entered into a $100,000 senior secured revolving credit facility with Nordea Bank Finland plc, acting through its New York branch (as amended, the “2010 Baltic Trading Credit Facility”).  An amendment to the 2010 Baltic Trading Credit Facility was entered into by Baltic Trading effective November 30, 2010.  Among other things, this amendment increased the commitment amount of the 2010 Baltic Trading Credit Facility from $100,000 to $150,000.  An additional amendment to the 2010 Baltic Trading Credit Facility was entered into by Baltic Trading effective August 29, 2013 (the “August 2013 Amendment”).  Among other things, the August 2013 Amendment implements the following modifications to the 2010 Baltic Trading Credit Facility:

 

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·                  The requirement that certain additional vessels acquired by Baltic Trading be mortgaged as collateral under the 2010 Baltic Trading Credit Facility was eliminated.

 

·                  Restrictions on the incurrence of indebtedness by Baltic Trading and its subsidiaries were amended to apply only to those subsidiaries acting as guarantors under the 2010 Baltic Trading Credit Facility.

 

·                  The total commitment under this facility was reduced to $110,000 and will be further reduced in three consecutive semi-annual reductions of $5,000 commencing on May 30, 2015.

 

·                  Borrowings bear interest at an applicable margin over LIBOR of 3.00% per annum if the ratio of the maximum facility amount of the aggregate appraised value of vessels mortgaged under the facility is 55% or less, measured quarterly; otherwise, the applicable margin is 3.35% per annum.

 

·                  Financial covenants corresponding to the liquidity and leverage under the Baltic Trading $22 Million Term Loan Facility (as defined below) have been incorporated into the 2010 Baltic Trading Credit Facility.

 

On December 31, 2014, Baltic Trading entered into the Baltic Trading $148 Million Credit Facility, refer to “Baltic Trading $148 Million Credit Facility” section below.  Borrowings under the Baltic Trading $148 Million Credit Facility were used to refinance Baltic Trading’s indebtedness under the 2010 Baltic Trading Credit Facility.  On January 7, 2015, Baltic Trading repaid the $102,250 outstanding under the 2010 Baltic Trading Credit Facility with borrowings from the Baltic Trading $148 Million Credit Facility.

 

Baltic Trading $22 Million Term Loan Facility

 

On August 30, 2013, Baltic Hare Limited and Baltic Fox Limited, wholly-owned subsidiaries of Baltic Trading, entered into a secured loan agreement with DVB Bank SE for a term loan facility of up to $22,000 (the “Baltic Trading $22 Million Term Loan Facility”).  Amounts borrowed and repaid under the Baltic Trading $22 Million Term Loan Facility may not be reborrowed.  This facility has a maturity date of the sixth anniversary of the drawdown date for borrowings for the second vessel to be purchased, or September 4, 2019.  Borrowings under the Baltic Trading $22 Million Term Loan Facility bear interest at the three-month LIBOR rate plus an applicable margin of 3.35% per annum. A commitment fee of 1.00% per annum is payable on the unused daily portion of the credit facility, which began accruing on August 30, 2013 and ended on September 4, 2013, the date which the entire $22,000 was borrowed.  Borrowings are to be repaid in 23 quarterly installments of $375 each commencing three months after the last vessel delivery date, or December 4, 2013, and a final payment of $13,375 due on the maturity date.

 

Borrowings under the Baltic Trading $22 Million Term Loan Facility are secured by liens on Baltic Trading’s vessels purchased with borrowings under the facility, namely the Baltic Fox and the Baltic Hare, and other related assets.  Under a Guarantee and Indemnity entered into concurrently with the Baltic Trading $22 Million Term Loan Facility, Baltic Trading agreed to guarantee the obligations of its subsidiaries under the Baltic Trading $22 Million Term Loan Facility.

 

On September 4, 2013, Baltic Hare Limited and Baltic Fox Limited made drawdowns of $10,730 and $11,270 for the Baltic Hare and the Baltic Fox, respectively.  As of June 30, 2015, Baltic Trading has utilized its maximum borrowing capacity of $22,000, and there was no further availability.  At June 30, 2015 and December 31, 2014, the total outstanding debt balance was $19,375 and $20,125, respectively.

 

As of June 30, 2015 the Company believes Baltic Trading is in compliance with all of the financial covenants under the Baltic Trading $22 Million Term Loan Facility.

 

Refer to “Amendment and Consent Agreements Related to the Merger” section above for discussion of the amendments, consents and waiver agreements entered into on July 14, 2015 by Baltic Trading related to the Baltic Trading $22 Million Term Loan Facility.  Upon the completion of the Merger on July 17, 2015, the Company executed a guaranty of the obligations of the borrowers under the Baltic Trading $22 Million Term Loan Facility.

 

2014 Baltic Trading 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 Baltic Trading Term Loan Facilities”) to partially finance the newbuilding Ultramax vessel that each subsidiary is to acquire, namely the Baltic Hornet and Baltic Wasp, respectively.  Amounts borrowed under the 2014 Baltic Trading Term Loan Facilities may not be reborrowed.  The 2014 Baltic Trading 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 Baltic Trading Term Loan Facilities are insured by the China Export & Credit Insurance

 

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Corporation (Sinosure) in order to cover political and commercial risks for 95% of the outstanding principal plus interest, which will be recorded in deferred financing fees.  Borrowings under the 2014 Baltic Trading 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 will commence six months after the actual delivery date for a vessel.

 

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

 

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 June 30, 2015, Baltic Trading has utilized its maximum borrowing capacity and there was no further availability.  At June 30, 2015 and December 31, 2014, the total outstanding debt balance was $32,450 and $33,150, respectively.

 

As of June 30, 2015, the Company believes Baltic Trading is in compliance with all of the financial covenants under the 2014 Baltic Trading Term Loan Facilities.

 

Refer to “Amendment and Consent Agreements Related to the Merger” section above for discussion of the amendments, consents and waiver agreements entered into on July 14, 2015 by Baltic Trading related to the 2014 Baltic Trading 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 Baltic Trading Term Loan Facilities.

 

Baltic Trading $148 Million Credit Facility

 

On December 31, 2014, Baltic Trading entered into a $148,000 senior secured credit facility with Nordea Bank Finland plc, New York Branch (“Nordea”), as Administrative and Security Agent, Nordea and Skandinaviska Enskilda Banken AB (Publ) (“SEB”), as Mandated Lead Arrangers, Nordea, as Bookrunner, and the lenders (including Nordea and SEB) party thereto (the “Baltic Trading $148 Million Credit Facility”).  The Baltic Trading $148 Million Credit Facility is comprised of an $115,000 revolving credit facility and $33,000 term loan facility.  Borrowings under the revolving credit facility were used to refinance Baltic Trading’s outstanding indebtedness under the 2010 Baltic Trading Credit Facility.  Amounts borrowed under the revolving credit facility of the Baltic Trading $148 Million Credit Facility may be re-borrowed.  Borrowings under the term loan facility of the Baltic Trading $148 Million Credit Facility may be incurred pursuant to two single term loans in an amount of $16,500 each that will be used to finance, in part, the purchase of two newbuilding Ultramax vessels that Baltic Trading has agreed to acquire, namely the Baltic Scorpion and Baltic Mantis.  Amounts borrowed under the term loan facility of the Baltic Trading $148 Million Credit Facility may not be re-borrowed.

 

The Baltic Trading $148 Million Credit Facility has a maturity date of December 31, 2019.  Borrowings under this facility bear interest at LIBOR plus an applicable margin of 3.00% per annum.  A commitment fee of 1.2% per annum is payable on the unused daily portion of the Baltic Trading $148 Million Credit Facility, which began accruing on December 31, 2014.  The commitment under the revolving credit facility of the Baltic Trading $148 Million Credit Facility is subject to equal consecutive quarterly reductions of $2,447 each beginning June 30, 2015 through September 30, 2019.  Borrowings under the term loan facility of the Baltic Trading $148 Million Credit Facility are subject to equal consecutive quarterly installment repayments commencing three months after delivery of the relevant newbuilding Ultramax vessel, each in the amount of 1/60 of the aggregate outstanding term loan.  All remaining amounts outstanding under the Baltic Trading $148 Million Credit Facility must be repaid in full on the maturity date, December 31, 2019.

 

Borrowings under the Baltic Trading $148 Million Credit Facility are secured by liens on nine of Baltic Trading’s existing vessels that have served as collateral under the 2010 Baltic Trading Credit Facility, the two newbuilding Ultramax vessels noted above, and other related assets, including existing or future time charter contracts in excess of 36 months related to the foregoing vessels.

 

The Baltic Trading $148 Million Credit Facility requires Baltic Trading to comply with a number of customary covenants substantially similar to those in the 2010 Baltic Trading Credit Facility, including financial covenants related to liquidity, leverage, consolidated net worth and collateral maintenance.

 

As of June 30, 2015, $33,000 remained available under the Baltic Trading $148 Million Credit Facility which represents the $33,000 term loan facility.  On August 3, 2015, the Company drew down $16,500 on the term loan facility for the purchase of the Baltic Scorpion. Refer to Note 23 — Subsequent Events.

 

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On January 7, 2015, Baltic Trading drew down $104,500 from the revolving credit facility of the Baltic Trading $148 Million Credit Facility.  Using these borrowings, Baltic Trading repaid the $102,250 outstanding under the 2010 Baltic Trading Facility.  Additionally, on February 27, 2015, Baltic Trading drew down $10,500 from the revolving credit facility of the Baltic Trading $148 Million Credit Facility.  Therefore, as of June 30, 2015, there was no remaining availability under the revolving credit facility of the Baltic Trading $148 Million Credit Facility.  At June 30, 2015 and December 31, 2014, the total outstanding debt balance was $112,553 and $0, respectively.

 

As of June 30, 2015, the Company believes Baltic Trading is in compliance with all of the financial covenants under the Baltic Trading $148 Million Credit Facility, except for the 140% collateral maintenance test.  The actual percentage measured by the Company was 132.0% at June 30, 2015.  Under the credit facility terms then in effect, we were required to remedy such a shortfall within 60 days; however, the collateral maintenance requirement was amended prior to the expiration of such period such that we were in compliance.  See “Amendment and Consent Agreements Related to the Merger” section.

 

Refer to “Amendment and Consent Agreements Related to the Merger” section above for discussion of the amendments, consents and waiver agreements entered into on July 14, 2015 by Baltic Trading related to the Baltic Trading $148 Million Credit Facility.  Upon the completion of the Merger on July 17, 2015, the Company executed a guaranty of the obligations of the borrowers under the Baltic Trading $148 Million Credit Facility.

 

As per the Amendment and Consent Agreements, the collateral maintenance will increase to 140% from 130% upon the funding of the initial term loan draw down on the facility.  During August 2015, the Company added two of its unencumbered Handysize vessels, the Genco Pioneer and Genco Progress, as additional collateral to cover any potential shortfall of the collateral maintenance test.

 

Interest rates

 

The following tables sets forth the effective interest rate associated with the interest expense for the Company’s debt facilities noted above, including the cost associated with unused commitment fees.  For the Predecessor Company for the six months ended June 30, 2014, the effective interest rate also included the rate differential between the pay fixed, receive variable rate on the interest rate swap agreements that were in effect (refer to Note 11 — Interest Rate Swap Agreements), combined, as well as the 1.0% facility fee for the credit agreement entered into on July 20, 2017 with DnB Nor Bank ASA (the “2007 Credit Facility”) which was terminated on the Effective Date.  The following table also includes the range of interest rates on the debt, excluding the impact of swaps and unused commitment fees, if applicable:

 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

 

Successor

 

Predecessor

 

Successor

 

Predecessor

 

 

 

2015

 

2014

 

2015

 

2014

 

Effective Interest Rate

 

3.54

%

4.31

%

3.54

%

4.33

%

Range of Interest Rates (excluding impact of swaps and unused commitment fees)

 

2.76% to 3.77

%

3.15% to 5.15

%

2.73% to 3.77

%

3.15% to 5.15

%

 

10 — CONVERTIBLE SENIOR NOTES

 

The Company issued $125,000 of the 5.0% Convertible Senior Notes on July 27, 2010 (the “2010 Notes”). The Indenture for the 2010 Notes included customary agreements and covenants by the Company, including with respect to events of default. As noted in Note 1 — General Information, the filing of the Chapter 11 Cases by the Company on April 21, 2014 constituted an event of default with respect to the 2010 Notes. On this date, the Company ceased recording interest expense related to the 2010 Notes.  On the Effective Date, when the Company emerged from Chapter 11, the 2010 Notes and the Indenture were fully satisfied and discharged.

 

The following table provides additional information about the Predecessor Company’s 2010 Notes:

 

 

 

Predecessor

 

 

 

For the Three
Months Ended
June 30,
2014

 

For the Six

Months Ended

June 30,
2014

 

Effective interest rate on liability component

 

10.0

%

10.0

%

Cash interest expense recognized

 

$

345

 

$

1,886

 

Non-cash interest expense recognized

 

293

 

1,592

 

Non-cash deferred financing amortization costs included in interest expense

 

39

 

216

 

 

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Table of Contents

 

11 - INTEREST RATE SWAP AGREEMENTS

 

As of March 31, 2014, the Company had one interest rate swap agreement outstanding with DNB Bank ASA to manage interest costs and risk associated with variable interest rates related to the Company’s 2007 Credit Facility.  The notional amount of the swap was $106,233.  As of March 31, 2014, the Company was in default under covenants of its 2007 Credit Facility due to the default on the schedule debt amortization payment due on March 31, 2014.  The default under the 2007 Credit Facility required the Company to elect interest periods of only one-month, therefore the Company no longer qualified for hedge accounting under the original designation and hedge accounting was terminated effective March 31, 2014.  Additionally, the filing of the Chapter 11 Cases by the Company on the Petition Date constituted an event of default with respect to the outstanding interest rate swap with DNB Bank ASA.  As a result, DNB Bank ASA terminated all transactions under the remaining swap agreement effective April 30, 2014 and filed a secured claim with the Bankruptcy Court of $5,622.  The claim was paid to DNB Bank ASA by the Successor Company during the period from July 9 to September 30, 2014.

 

As of June 30, 2015 and December 31, 2014 the Company did not have any interest rate swap agreements.

 

The differentials to be paid or received for these swap agreements were recognized as an adjustment to interest expense as incurred.  The Company utilized cash flow hedge accounting for these swaps through March 31, 2014, whereby the effective portion of the change in the value of the swaps is reflected as a component of AOCI.  The ineffective portion is recognized as Other expense, which is a component of Other income (expense).  On March 31, 2014, the cash flow hedge accounting on the remaining swap agreement was discontinued.  Once cash flow hedge accounting was discontinued, the changes in the fair value of the interest rate swaps were recorded in the Condensed Consolidated Statement of Operations in Interest expense and the remaining amounts included in AOCI were amortized to Interest expense over the original term of the hedging relationship for the Predecessor Company.

 

The following tables present the impact of derivative instruments and their location within the Condensed Consolidated Statement of Operations:

 

The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations

For the Three-Month Period Ended June 30, 2014

Predecessor Company

 

Derivatives in Cash
Flow Hedging

 

Amount of
Gain (Loss)
Recognized
in AOCI on
Derivative
(Effective
Portion)

 

Location of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective

 

Amount of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective
Portion)

 

Location of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective

 

Amount of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion)

 

Relationships

 

2014

 

Portion)

 

2014

 

Portion)

 

2014

 

Interest rate contracts

 

$

 

Interest Expense

 

$

(1,078

)

Other Income (Expense)

 

$

 

 

The Effect of Derivative Instruments on the Condensed Consolidated Statement of Operations

For the Six-Month Period Ended June 30, 2014

Predecessor Company

 

Derivatives in Cash
Flow Hedging

 

Amount of
Gain (Loss)
Recognized
in AOCI on
Derivative
(Effective
Portion)

 

Location of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective

 

Amount of
Gain (Loss)
Reclassified
from AOCI
into income
(Effective
Portion)

 

Location of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective

 

Amount of
Gain (Loss)
Recognized in
Income on
Derivative
(Ineffective
Portion)

 

Relationships

 

2014

 

Portion)

 

2014

 

Portion)

 

2014

 

Interest rate contracts

 

$

(179

)

Interest Expense

 

$

(2,485

)

Other Income (Expense)

 

$

 

 

The Company was required to provide collateral in the form of vessel assets to support the interest rate swap agreements, excluding vessel assets of Baltic Trading.  Prior to the termination of the 2007 Credit Facility on the Effective Date, the Company’s 35 vessels mortgaged under the 2007 Credit Facility served as collateral in the aggregate amount of $100,000.

 

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12 - ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

The components of AOCI included in the accompanying condensed consolidated balance sheets consist of net unrealized gain (loss) on cash flow hedges and net unrealized gains (losses) from investments in Jinhui stock and KLC stock for the Predecessor Company.  For the Successor Company, the components of AOCI included in the accompanying condensed consolidated balance sheets consist only of net unrealized gains (losses) from investments in Jinhui stock and KLC stock based on the revised cost basis recorded as part of fresh-start reporting.

 

Changes in AOCI by Component

For the Three-Month Period Ended June 30, 2015

Successor Company

 

 

 

Net Unrealized
Gain (Loss)
on
Investments

 

AOCI — April 1, 2015

 

$

(22,958

)

 

 

 

 

OCI before reclassifications

 

(3,402

)

Amounts reclassified from AOCI

 

 

Net current-period OCI

 

(3,402

)

 

 

 

 

AOCI — June 30, 2015

 

$

(26,360