The shipping company, Genco, plans to file for bankruptcy by the end of March. The company operates ships that transport grain, coal, iron ore and soybeans. The Chapter 11 filing will be completed in order to protect the company from a $50 million debt obligation that is coming due. Companies in New Jersey and other parts of the country often utilize bankruptcy in this fashion to protect themselves from an impending debt payment that they cannot afford to pay.
This company, which owns and operates 53 tanker ships, recently made a late debt payment of $3.1 million in order to buy some additional time to complete a prepackaged bankruptcy plan. Also, shares of the shipping company, which once traded at $80, fell to $1.24 after news of the impending bankruptcy went public. The company is said to owe $1.1 billion in debt to bank lenders, and it owes $125 million to bondholders.
According to VesselValue, the company’s fleet of ships could be liquidated for approximately $1.2 billion. Therefore, its debts are relatively equal to its assets. According to a shipping veteran who was commenting on the impending bankruptcy, the shipping industry can be cyclical, and prudent companies prepare in advance for times that are slow.
Sometimes, no matter how much a New Jersey company prepares, the challenges presented by difficult economic times are insurmountable. In such cases, Chapter 11 bankruptcy can buy a company valuable time in which to reorganize its finances. When successfully navigated, bankruptcy proceedings can keep an ailing company in business, help it operate more efficiently and save the jobs of its employees.
Source: New York Post, NY shipping tycoon to take second bankruptcy hit, Josh Kosman, March 20, 2014