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GM unveils bonds issue

GM unveils bonds issue
General Maritime has unveiled a $230m proposed issue of high-yield bonds, as part of a refinancing package that would also see the company pay higher interest on its bank debt.

General Maritime has unveiled a $230m proposed issue of high-yield bonds, as part of a refinancing package that would also see the company pay higher interest on its bank debt.

General Maritime has unveiled a $230m proposed issue of high-yield bonds, as part of a refinancing package that would also see the company pay higher interest on its bank debt.

The proposed issue of five-year senior unsecured notes with $230m in net proceeds would be among the first high-yield bonds issued by a mainstream US-listed shipping company amid a plethora of such issues seen among general industry since September.

The proposed bond issue is linked with a multi-dimensional loan restructuring.

The commitment under the company"s 2005 credit facility has been reduced to $749.8m. According to the quarterly report filed in August, the facility provided an $849.9m revolving loan with semi-annual reductions of $50m commencing in May 2010. As per the revised schedule, the first reduction would now be in April 2011.

The company said a ?late customer payment? caused it to breach the minimum cash balance covenant at the end of September, but this breach would be waived under the proposed agreement with lenders.

General Maritime would pay interest at 250 points over the London Interbank Offered rate, a 150-point hike over the current spread of 100 points.

The company would agree a stricter vessel collateral reporting regime, at half-yearly instead of yearly. The 2005 facility is collateralised by 22 of the company"s double-hull vessels with an aggregate carrying value as of June 30, 2009 of $754.6m.

The net debt to earnings before interest, tax, depreciation and amortisation ratio would be held at 6:5 to 1 until September next year, and 5.5 to 1 after September 2011.

The company has also committed to hold its quarterly dividend at $0.125 per share, which it unveiled last quarter. This level is one-fourth the $0.50 that General Maritime was committed to last year.

All these facets would be contingent upon the success of the $230m junk bond issue before November 30. If the bond issue does not come off, the company would seek alternative waiver arrangements, but would still pay a higher interest rate.

These developments were revealed as General Maritime returned a third quarter net profit of $14.8m, down 37% from last year"s corresponding $23.5m. Revenues were flat at $83m, against $82.3m. This was despite the company"s fleet increasing by 47% over the period, from 21 ships to 31.

The company"s quarterly bottom line included $13.1m added to income, to reflect an accelerated amortisation of the net time charter liability on four Stena vessels that would be redelivered earlier than anticipated.

Without the additional income the company ended the quarter barely in the black, with an adjusted net profit of $1.6m.

Timecharter equivalent revenues on the company"s fleet were down 38.6% on the quarter, to $23,136 a day from 2008"s $37,651 a day.

Based on existing and recently renewed timecharters on the company"s fully double-hulled fleet of 31, comprising two very large crude carriers, 12 aframaxes, 11 suezmaxes, tankers, two panamaxes and four handymax product tankers, General Maritime is projecting 42% contract cover for 2010.

www.TurkishMaritime.com.tr

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