Genco Shipping & Trading, faced with an encroaching creditor-imposed deadline to raise $125m in new equity, tapped its three largest shareholders for the entire amount through a preferred share issuance.
Genco needed to raise the new equity as a condition for closing of a $400m loan agreed to back in June to refinance Genco’s existing debt.
The equity raise came after Genco received four extensions from its lending syndicated on the deadline for raising the new equity. The latest deadline was for the new equity to be raised by 7 October.
Genco’s three largest shareholders, Centerbridge Partners, Strategic Value Partners (SVP) and Apollo Global Management, had preliminarily pledged to spend $62.5m on the new equity. But they will now provide the entire amount through buying preferred shares.
In April, Genco’s shareholders approved issuing up to 100 million preferred shares in one or more classes as determined by the board of directors.
Centerbridge, SVP and Apollo will purchase 25.7 million of the newly minted Series A preferred shares at $4.85 a piece.
In a subsequent ownership filing, SVP said it will be committing $37m to the new Series A shares, which carry a 6% dividend.
The Series A preferred stock has a liquidation preference of $4.85 per share and will mandatorily convert into shares of Genco common stock at a conversion price of $4.85 per share, subject to certain adjustments, upon receipt of approval of such conversion by Genco shareholders.
Genco said the amount purchased by the foregoing investors may be reduced by some $38.6m if it can sell some of the preferred shares in a private placement. Genco will also issue an additional $6.25m in Series A stock to the foregoing investors as a commitment fee.
Despite not being able to attract new shareholders, the removal of the refinancing risk through the new equity raise helped lift Genco shares in early trading. The company saw its shares rise $1.48 to reach $5.99, a 33% gain.
