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GENERAL INFORMATION | 9 Months Ended
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Sep. 30, 2016
GENERAL INFORMATION |
GENERAL INFORMATION | 1 - GENERAL INFORMATION The accompanying condensed consolidated financial statements include the accounts of Genco Shipping & Trading Limited (“GS&T”) and its direct and indirect wholly-owned subsidiaries, including 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, 2016, is the sole owner of all of the outstanding shares or limited liability company interests of the following subsidiaries: Genco Ship Management LLC; Genco Investments LLC; Genco RE Investments LLC; and the ship-owning subsidiaries as set forth below under “Other General Information.” As of September 30, 2016, Genco Ship Management LLC is the sole owner of all of the outstanding limited liability company interests of Genco Management (USA) LLC. On April 15, 2016, the shareholders of the Company approved, at a Special Meeting of Shareholders (the “Special Meeting”), proposals to amend the Second Amended and Restated Articles of Incorporation of the Company to (i) increase the number of authorized shares of common stock of the Company from 250,000,000 to 500,000,000 and (ii) authorize the issuance of up to 100,000,000 shares of preferred stock, in one or more classes or series as determined by the Board of Directors of the Company. The authorized shares did not change as a result of the reverse stock split. Following the Special Meeting on such date, the Company filed Articles of Amendment of its Second Amended and Restated Articles of Incorporation with the Registrar of Corporations of the Republic of the Marshall Islands to implement to the foregoing amendments. Additionally, at the Special Meeting, the shareholders of the Company approved a proposal to amend the Second Amended and Restated Articles of Incorporation of the Company to effect a reverse stock split of the issued and outstanding shares of Common Stock at a ratio between 1-for-2 and 1-for-25 with such reverse stock split to be effective at such time and date, if at all, as determined by the Board of Directors of the Company, but no later than one year after shareholder approval thereof. On July 7, 2016, the Company completed a one-for-ten reverse stock split of its common stock. As a result, all share and per share information included for all periods presented in these condensed consolidated financial statements, with the exception of any share information for Baltic Trading, reflect the reverse stock split. Refer to Note 6 — Net Loss per Common Share and Note 18 — Stock-Based Compensation. On October 13, 2016, Peter C. Georgiopoulos resigned as Chairman of the Board and a director of the Company. The Board of Directors appointed Arthur L. Regan, a current director of the Company, as Interim Executive Chairman of the Board. In connection with his departure, Mr. Georgiopoulos entered into a Separation Agreement and a Release Agreement with the Company on October 13, 2016. Under the terms of these agreements, subject to customary conditions, Mr. Georgiopoulos is to receive an amount equal to the annual Chairman’s fee awarded to him in recent years of $500 as a severance payment and full vesting of his unvested equity awards, which consist of grants of 68,581 restricted shares of the Company’s common stock and warrants exercisable for approximately 213,937 shares of the Company’s common stock with an exercise price per share ranging $259.10 to $341.90. Refer to Note 18 — Stock-Based Compensation. The agreements also contain customary provisions pertaining to confidential information, releases of claims by Mr. Georgiopoulos, and other restrictive covenants. Liquidity, Going Concern, and Reclassification of Debt to Current For purposes of preparing financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), the Company is required to disclose if it is in compliance with covenants under all of its nine credit facilities on a quarterly basis. Pursuant to the Second Amended Commitment Letter, the Amended $98 Million Credit Facility Commitment Letter and the waiver entered into for the 2014 Term Loan Facilities (refer to Note 8 — Debt for defined terms), the collateral maintenance and maximum leverage requirements under all nine of the Company’s credit facilities have been waived through September 30, 2016, with the exception of the Amended $98 Million Credit Facility Commitment Letter, which reduced the collateral maintenance requirement from 140% to 120% and the 2014 Term Loan Facilities, for which the waivers were extended through November 15, 2016, except that such extended waivers under the 2014 Term Loan Facilities will be void if Sinosure gives written notice to the agent bank that it does not approve the waivers. Each of the Company’s credit facilities contain cross default provisions that could be triggered by the Company’s failure to satisfy or waive its collateral maintenance and maximum leverage covenants once the waivers expire. Given the existence of the cross default provisions and the absence of any current solution which would cure the noncompliance for at least the next twelve months, absent entering into the New Facility (see Note 8 — Debt), the Company has determined that it should classify its outstanding indebtedness as a current liability as of September 30, 2016 and December 31, 2015. Persistent weak drybulk industry conditions and historically low charter rates have negatively impacted the Company’s results of operations, cash flows, and liquidity and may continue to do so in the future. The negative impact on the Company’s liquidity, together with a continued decline in vessel values, presents difficulties for remaining in compliance with its credit facility covenants relating to minimum cash, leverage ratios, and collateral maintenance (refer to Note 8 — Debt), which could potentially result in defaults and acceleration of the repayment of its outstanding indebtedness. These factors, as well as recurring losses from operations and negative working capital, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared on the basis of accounting principles applicable to a going concern, which contemplates the realization of assets and extinguishment of liabilities in the normal course of business. The Company’s ability to continue as a going concern is contingent upon, among other things, its ability to: (i) develop and successfully implement a plan to address these factors, which may include refinancing the Company’s existing credit agreements, or obtaining further waivers or modifications to its credit agreements from its lenders, or raising additional capital through selling assets (including vessels), reducing or delaying capital expenditures, or pursuing other options that may be available to the Company which may include pursuing strategic opportunities and equity or debt offerings or potentially seeking protection in a Chapter 11 proceeding; (ii) return to profitability, (iii) generate sufficient cash flow from operations, (iv) remain in compliance with its credit facility covenants, as the same may be modified, and (v) obtain financing sources to meet the Company’s future obligations. Refer to “Commitment Letter” section in Note 8 — Debt for a discussion of the New Facility for an aggregate principal amount of up to $400,000. The realization of the Company’s assets and the satisfaction of its liabilities are subject to uncertainty. The accompanying condensed consolidated financial statements do not include any direct adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern, except in regards to the classification of outstanding indebtedness as described above. Merger Agreement with Baltic Trading On April 7, 2015, the Company entered into a definitive merger agreement with Baltic Trading Limited (“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 to be 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 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 are 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 a unanimous vote of directors present and voting, with Peter C. Georgiopoulos, former 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 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 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 was 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 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 owned 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 was 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 the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, “Business Combinations” (“ASC 805”), for transactions among 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 was reflected as an adjustment to Additional paid-in capital in the Condensed Consolidated Statement of Equity when the sale was completed on April 7, 2015. The independent special committees of both companies’ Boards of Directors reviewed and approved these transactions. Other General Information Below is the list of the Company’s wholly owned ship-owning subsidiaries as of September 30, 2016:
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 | (3) | 1998 |
Genco Pioneer Limited |  | Genco Pioneer |  | 29,952 |  | 1/4/05 | (4) | 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 | (5) | 1999 |
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 |
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 |  | 2015 |
Baltic Mantis Limited |  | Baltic Mantis |  | 63,470 |  | 10/9/15 |  | 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 the vessel was delivered to Baltic Trading.
| (3) |  | The Genco Sugar was sold on October 20, 2016. Refer to Note 20 – Subsequent Events.
| (4) |  | The Genco Pioneer was sold on October 26, 2016. Refer to Note 20 – Subsequent Events.
| (5) |  | The Genco Leader was sold on November 4, 2016. Refer to Note 20 – Subsequent Events.
The Company formerly provided technical services for drybulk vessels purchased by Maritime Equity Partners (“MEP”). Peter C. Georgiopoulos, former Chairman of the Board of Directors of the Company, is a director of and has a minority interest in MEP. These services included oversight of crew management, insurance, drydocking, ship operations and financial statement preparation, but did not include chartering services. The services were initially 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. On September 30, 2015, under the oversight of an independent committee of our Board of Directors, Genco Management (USA) LLC and MEP entered into certain agreements under which MEP paid $2,178 of the amount of service fees in arrears (of which $261 was paid in 2016 by the new owners of five of the MEP vessels sold in January 2016 as described below) and the daily service fee was reduced from $750 to $650 per day effective on October 1, 2015. During January 2016, five of MEP’s vessels were sold to third parties and were no longer subject to the agency agreement. Based upon the September 30, 2015 agreement, termination fees were due in the amount of $296 which was assumed by the new owners of the five MEP vessels that were sold and were paid in full during February 2016. Additionally, during the three months ended September 30, 2016, the remaining seven of MEP’s vessels were sold to third parties, and the agency agreement was deemed terminated upon the sale of these vessels. Based upon the September 30, 2015 agreement, termination fees were due in the amount of $830, which was assumed by the new owners of the seven MEP vessels that were sold and were paid in full as of September 30, 2016. Refer to Note 7 – Related Party Transactions for amounts due to or from MEP as of September 30, 2016 and December 31, 2015.

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