Genco equity committee claims solvency, objects to plan confirmation

By Kali Hays

New York, June 6 – Genco Shipping & Trading Ltd.’s official committee of equity security holders objected to confirmation of the company’s pre-packaged plan of reorganization, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The bulk of the committee’s objection lies in its assertion that Genco cannot establish the plan as fair and equitable to equity holders because the company and its financial adviser, Blackstone Advisory Partners LP, “have engineered an unreasonably low valuation based on ultra-conservative and manipulated projections in an effort to understate the current enterprise value of the operations and to deprive current equity holders of a fair recovery under the plan.”

The committee alleged that the company is solvent with an enterprise value that exceeds the estimation valued at $1.38 billion by Blackstone that is included in the disclosure statement, according to the objection.

At the confirmation hearing the committee expects to show that Blackstone’s valuation was manipulated through its use of an “asset-based” valuation methodology “based only on Genco’s hard assets and not projected cash flows of the reorganized debtor” that was intentionally employed “to confer excessive value on management and the plan supporters by reducing the likelihood that holders of equity interests could participate in the substantial upside potential of the reorganized and recapitalized debtors.”

The committee also refuted Blackstone’s assertion that another mode of valuation is inappropriate “because the dry bulk shipping industry allegedly cannot sustain returns in excess of its cost of capital.”

“Blackstone’s assumptions are not only economically inconsistent, but also conflict with market consensus and shipping industry view that the industry is well positioned to generate significant returns on investment through a cyclical market upswing in the coming years,” the committee said.

A hearing to confirm Genco’s proposed plan of reorganization is set for June 12.

Genco, a New York-based transporter of iron ore, coal, grain, steel products and other drybulk cargoes, filed bankruptcy on April 21. The Chapter 11 case number is 14-11108.

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