General Maritime committee objects to equity agreement, bid procedures

By Lisa Kerner

Charlotte, N.C., Dec. 12 - General Maritime Corp.'s official committee of unsecured creditors filed an objection to the debtors' request for court approval of an equity commitment agreement including payment of related fees, and to the debtors' request for approval of bid procedures for the sale of substantially all of its assets if a trigger event occurs under its debtor-in-possession credit agreement, according to a pair of Monday filings with the U.S. Bankruptcy Court for the Southern District of New York.

Hearings on both matters are set for Dec. 15.

The committee objects to the equity commitment agreement with Oaktree Capital Management because it believes the "plan thrust upon the debtors by Oaktree has the debtors heading down a path of prosecuting a plan of reorganization that is not confirmable as matter of law."

Also, the commitment fee is "unclear" and "unwarranted" and the breakup fee is "unreasonably high," according to the filing.

The commitment fee will be paid in the form of five-year warrants exercisable for up to 5.0% of the equity in the reorganized debtors on the effective date of the plan.

In May 2011, the debtors completed a $200 million third-lien financing with two Oaktree Capital Management affiliates. Oaktree was granted a third lien on substantially all of the debtors' assets and given warrants for up to 19.9% percent of the debtors' common stock.

According to the filing, almost $140 million of the loan proceeds went to repay the debtors' existing secured credit facilities, leaving the debtors with very little new working capital.

Procedures hamper bidding

Regarding the bid procedures, the committee said they cannot be approved because the requested bid protections are not necessary to induce a bid from the senior lenders and they don't encourage bidding.

The committee is also opposed to the proposed bid objection deadlines, breakup fee and expense reimbursement.

As previously reported in November, General Maritime requested court approval to sell substantially all of its assets if a trigger event occurs under its DIP credit agreement.

General Maritime said the sale motion covers only a scenario under which a plan of reorganization based on a proposed $175 million equity commitment agreement is not confirmed.

If a trigger event occurs, the company said it would either immediately enter into an asset purchase agreement providing for the credit bid of the claims of its pre-bankruptcy senior lenders and DIP financing lenders or enter into a stalking horse agreement with an alternative bidder within 10 days of the trigger event.

Any alternative stalking horse bid must provide for payment in full of the facilities.

If the senior lenders are not the high bidder for the assets at auction, General Maritime will pay them a breakup fee of 1% of the purchase price and reimburse their bid negotiation-related expenses.

The bidding deadline would be noon ET 70 days after the trigger event. Minimum bids must be for at least $500,000 more in cash than the stalking horse bid, plus the amount of the breakup fee and expense reimbursement.

A hearing to approve the bid procedures is also set for Dec. 15.

The official committee of unsecured creditors was appointed in late November.

Committee members include David Kerr, vice president, Bank of New York Mellon; Teresa Fox of Stone Harbor Investment Partners; Brian Ladin, partner, Delos Investment Management; Fabrizio Forghieri, manager, Fratelli Cosulich LDA Madeira; and Sebastian Moura, controller, Ultramar Agencia Maritima Ltda.

General Maritime is a New York-based provider of international seaborne crude oil transportation services. The company filed for bankruptcy on Nov. 17. The Chapter 11 case number is 11-15285.

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