GENERAL INFORMATIO

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 wholly-owned indirect 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 September 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 September 30, 2015, Genco Ship Management LLC is the sole owner of all of the outstanding shares of Genco Management (USA) Limited.

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.

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.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”).

Prior to the completion of the Merger, the Company prepared its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and consolidated the operations of Baltic Trading. The Baltic Trading common shares that the Company acquired in the Merger were previously 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 pursuant to the Merger is reflected as an adjustment to the equity in the Company. No gain or loss has been 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 nine months ended September 30, 2015. The independent special committees of both companies’ Boards of Directors reviewed and approved these transactions.

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.

Under ASC 852, fresh-start reporting is required upon emergence from Chapter 11 if (i) the value of the assets of the emerging entity immediately before the date of confirmation is less than the total of all post-petition liabilities and allowed claims; and (ii) holders of existing voting shares immediately before confirmation receive less than 50% of the voting shares of the emerging entity. Accordingly, the Company qualified for and adopted fresh-start reporting as of the Effective Date. Adopting fresh-start reporting results in a new reporting entity with no beginning retained earnings or deficit. The cancellation of all existing shares outstanding on the Effective Date and issuance of new shares of the reorganized entity caused a related change of control of the Company under ASC 852.

The following fresh-start balance sheet illustrates the financial effects on the Company of the implementation of the Plan and the adoption of fresh-start reporting. This fresh-start balance sheet reflects the effect of the completion of the transactions included in the Plan, including the issuance of equity and the settlement of old indebtedness.

The effects of the Plan and fresh-start reporting on the Company’s consolidated balance sheet (as restated) are as follows:

	Fresh-Start Adjustments
	Predecessor July 9, 2014			Debt Discharge and Equity Issuance (a) (restated)			Reinstatement of Liabilities (b)			Revaluation of Assets and Liabilities (c) (restated)			Successor July 9, 2014
Assets
Current assets:
Cash and cash equivalents	$	48,551		$	87,526		$	—		$	—		$	136,077
Restricted cash	9,975			—			—			—			9,975
Due from charterers, net	13,194			—			—			—			13,194
Prepaid expenses and other current assets	30,800			—			—			(41		)	30,759
Time charters acquired	—			—			—			450			450

Total current assets	102,520			87,526			—			409			190,455


Noncurrent assets:
Vessels, net	2,604,731			—			—			(1,065,882		)	1,538,849
Deposits on vessels	28,658			—			—			2,317			30,975
Deferred drydock, net	16,584			—			—			(16,396		)	188
Deferred financing costs, net	18,953			(11,893		)	—			—			7,060
Fixed assets, net	4,053			—			—			(3,443		)	610
Other noncurrent assets	514			—			—			—			514
Restricted cash	300			—			—			—			300
Investments	51,804			—			—			—			51,804
Goodwill	—			—			—			166,067			166,067

Total noncurrent assets	2,725,597			(11,893		)	—			(917,337		)	1,796,367


Total assets	$	2,828,117		$	75,633		$	—		$	(916,928	)	$	1,986,822


Liabilities and Equity
Current liabilities not subject to compromise:
Accounts payable and accrued expenses	$	60,333		$	(1,086	)	$	6,478		$	—		$	65,725
Current portion of long-term debt	4,250			—			27,992			—			32,242
Deferred revenue	997			—			—			—			997
Time charters acquired	16			—			—			(16		)	—

Total current liabilities not subject to compromise	65,596			(1,086		)	34,470			(16		)	98,964


Noncurrent liabilities not subject to compromise:
Long-term lease obligations	2,670			—			—			(2,670		)	—
Long-term debt	161,500			—			214,289			—			375,789

Total noncurrent liabilities not subject to compromises	164,170			—			214,289			(2,670		)	375,789


Total liabilities subject to compromise	1,443,446			(1,194,687		)	(248,759		)	—			—

Total liabilities	1,673,212			(1,195,773		)	—			(2,686		)	474,753


Equity:
Genco Shipping & Trading Limited shareholders’ equity:
Predecessor Common stock	445			(445		)	—			—			—
Predecessor Additional paid-in capital	849,130			(849,130		)	—			—			—
Successor Common stock	—			603			—			—			603
Successor Additional paid-in capital	—			1,232,397			—			—			1,232,397
Accumulated other comprehensive income	30,357			(30,357		)	—			—			—
Retained (deficit) earnings	(57,463		)	918,338			—			(860,875		)	—

Total Genco Shipping & Trading Limited shareholders’ equity	822,469			1,271,406			—			(860,875		)	1,233,000

Noncontrolling interest	332,436			—			—			(53,367		)	279,069

Total equity	1,154,905			1,271,406			—			(914,242		)	1,512,069


Total liabilities and equity	$	2,828,117		$	75,633		$	—		$	(916,928	)	$	1,986,822

(a)

Debt Discharge and Equity Issuance — This column reflects the following adjustments pursuant to the Plan:

Items comprising the net gain on settlement of liabilities subject to compromise in exchange for equity issuance — see Note 18.

	Predecessor
	Period from January 1 to July 9, 2014
Discharge of the outstanding debt under the 2007 Credit Facility	$	1,055,912
Discharge of the long-term interest payable due pursuant to the 2007 Credit Facility	13,199
Discharge of the 2010 Notes liability	117,473
Discharge of coupon interest on the 2010 Notes liability	1,105
The elimination of deferred financing fees associated with the discharged obligations	(15,383		)
The elimination of accumulated other comprehensive income related to interest rate swaps associated with the discharged obligations	(4,574		)
Issuance of Successor common stock	(1,133,900		)
Net gain on the discharge of Predecessor liabilities related to liabilities subject to compromise and associated issuance of Successor equity	$	33,832

Other items associated with the settlement of liabilities subject to compromise:

The payment of interest expense accrued up to the Effective Date of $1,772, $59 and $156 for the 2007 Credit Facility, the $100 Million Term Loan Facility and the $253 Million Term Loan Facility, respectively.

The pay down on the Effective Date of $1,923 and $5,075 for the $100 Million Term Loan Facility and $253 Million Term Loan Facility, respectively, which were due on the Effective Date as they were not paid during the pendency of the Chapter 11 Cases.

The payment of deferred financing fees of $3,490 for the Amended and Restated $100 Million and $253 Million Term Loan Facilities.

The reclassification to retained (deficit) earnings of $34,931 related to the gain associated with the Company’s investments.

The reclassification of $900 of initial equity to accounts payable that represents the estimated amount of the notes discharged that will be paid in cash to non-accredited investors.

The reclassification to retained (deficit) earnings of the Predecessor common stock of $445 and Predecessor additional paid in capital of $849,130.

Receipt of the proceeds of the $100,000 rights offering pursuant to the Plan.

(b)

Reinstatement of Liabilities — This column reflects the reinstatement of the remaining Liabilities subject to compromise for the Predecessor Company which were not already adjusted in the Debt Discharge and Equity Issuance column. It includes the following adjustments:

The reclassification of the debt outstanding under the Amended and Restated $100 Million Term Loan Facility. This includes $7,692 of current long-term debt and $63,946 of long-term debt.

The reclassification of the debt outstanding under the Amended and Restated $253 Million Term Loan Facility. This includes $20,300 of current long-term debt and $150,343 of long-term debt.

The reinstatement of $5,622 related to the termination of the interest rate swap agreement with DNB Bank ASA.

The reinstatement of the $815 lease obligation.

The reinstatement of $41 of pre-petition accounts payable due to vendors in the United States.

(c)

Revaluation of Assets and Liabilities — Fresh-start reporting adjustments are made to reflect asset values at their estimated fair value, including:

Adjustment of $179 to prepaid amounts for the Predecessor Company.

Adjustment to reflect the fair value of time charters acquired of $434.

Adjustment of $1,083,404 to reflect the fair value of vessel assets, vessel deposits, drydocking assets and other fixed assets as of the Effective Date. The portion of the asset revaluation associated with Baltic Trading’s noncontrolling interest in the amount of $74,355 was reflected as a reduction of noncontrolling interest.

Adjustment of $2,670 to reflect the fair value of the Company’s current lease agreement, which was previously recorded as long-term lease obligations. As of the Effective Date, the lease agreement has been valued at below market; therefore, we have recorded in “Prepaid expenses and other current assets” an asset of $138, which will be amortized over the remaining life of the lease agreement.

Goodwill in the amount of $166,067 was recognized, which represents the portion of the total reorganization value that was not attributed to specific tangible or identifiable intangible assets. The portion of the goodwill recognized in relation to Baltic Trading noncontrolling interest in the amount of $24,022 was reflected as an increase in noncontrolling interest. A summary of the allocation of the reorganization value to the fair value of the Successor Company net assets, including goodwill, is as follows:

			Total
Reorganization Value
Value of shares issued to pre-petition claimants	$	1,133,000
Proceeds of rights offering	100,000		$	1,233,000

Estimated fair value of debt
Current portion of long-term debt	32,242
Long term debt	375,789		408,031

Estimated fair value of non-debt liabilities
Deferred revenue	997
Accounts payable and accrued expenses	65,725		66,722


Noncontrolling interest			279,069


Reorganization value of assets			1,986,822

Estimated fair value of assets (excluding goodwill) (a)			(1,820,755		)


Reorganization value of assets in excess of fair value — goodwill (b)			$	166,067

(a)

Estimated fair value of assets (excluding goodwill) consists of:

Total current assets	$	190,455
Vessels, net	1,538,849
Deposits on vessels	30,975
Deferred drydock, net	188
Deferred financing costs, net	7,060
Fixed assets, net	610
Other noncurrent assets	514
Restricted cash	300
Investments	51,804
Total assets excluding goodwill	$	1,820,755

(b)

The goodwill recognized by the Predecessor Company during the period from January 1 to July 9, 2014 was subsequently deemed impaired during the three months ended December 31, 2014.

The total reduction of $53,367 in noncontrolling interest is due to the adjustment of the fair value of the noncontrolling interest derived from the Baltic Trading asset revaluation and goodwill described above and an additional revaluation adjustment of $3,034. The revalued noncontrolling interest was determined based on a relative fair value allocation of Baltic Trading’s estimated equity value as July 8, 2014, which multiplied the percentage of Baltic Trading’s equity ownership attributable to non-controlling interests by the estimated equity value of Baltic Trading as of such date. The estimated equity value of Baltic Trading as of such date was determined by multiplying the closing price of Baltic Trading’s publicly traded common stock by the total number of shares of Baltic Trading’s common stock and Class B stock outstanding on July 8, 2014.

Other General Information

Baltic Trading 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 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 the Company’s wholly owned ship-owning subsidiaries as of September 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
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	4/8/15 (1)	2012
Baltic Tiger Limited	Genco Tiger	179,185	4/8/15 (1)	2011
Baltic Leopard Limited	Baltic Leopard	53,447	4/8/10 (2)	2009
Baltic Panther Limited	Baltic Panther	53,351	4/29/10 (2)	2009
Baltic Cougar Limited	Baltic Cougar	53,432	5/28/10 (2)	2009

Wholly Owned Subsidiaries	Vessel Acquired	Dwt	Delivery Date	Year Built

Baltic Jaguar Limited	Baltic Jaguar	53,474	5/14/10 (2)	2009
Baltic Bear Limited	Baltic Bear	177,717	5/14/10 (2)	2010
Baltic Wolf Limited	Baltic Wolf	177,752	10/14/10 (2)	2010
Baltic Wind Limited	Baltic Wind	34,409	8/4/10 (2)	2009
Baltic Cove Limited	Baltic Cove	34,403	8/23/10 (2)	2010
Baltic Breeze Limited	Baltic Breeze	34,386	10/12/10 (2)	2010
Baltic Fox Limited	Baltic Fox	31,883	9/6/13 (2)	2010
Baltic Hare Limited	Baltic Hare	31,887	9/5/13 (2)	2009
Baltic Hornet Limited	Baltic Hornet	63,574	10/29/14 (2)	2014
Baltic Wasp Limited	Baltic Wasp	63,389	1/2/15 (2)	2015
Baltic Scorpion Limited	Baltic Scorpion	63,462	8/6/15 (2)	2015
Baltic Mantis Limited	Baltic Mantis	63,470	10/9/15 (2)	2015

(1)

The delivery date for these vessels represents the date that the vessel was purchased from Baltic Trading.

(2)

The delivery date for these vessels represents the date that Baltic Trading purchased the vessel.

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. On September 30, 2015, under the oversight of an independent committee of our Board of Directors, Genco Management (USA) Limited and MEP entered into certain agreements under which MEP paid $1,000 of the amount of service fees in arrears, a schedule was agreed for payment of the remaining amount in arrears, and the daily service fee was reduced from $750 to $650 per day effective on October 1, 2015. Refer to Note 7 — Related Party Transactions for amounts due from MEP as of September 30, 2015.