| DEBT | 7 – DEBT
Long-term debt, net consists of the following:
June 30,
December 31,
2018
2017
Principal amount
$
460,000
$
519,083
PIK interest
—
5,341
Less: Unamortized debt financing costs
(16,063)
(9,032)
Less: Current portion
(45,000)
(24,497)
Long-term debt, net
$
398,937
$
490,895
June 30, 2018
December 31, 2017
Unamortized
Unamortized
Debt Financing
Debt Financing
Principal
Cost
Principal
Cost
$460 Million Credit Facility
$
460,000
$
16,063
$
—
$
—
$400 Million Credit Facility
—
—
399,600
6,332
$98 Million Credit Facility
—
—
93,939
1,370
2014 Term Loan Facilities
—
—
25,544
1,330
PIK interest
—
—
5,341
—
Total debt
$
460,000
$
16,063
$
524,424
$
9,032
As of June 30, 2018 and December 31, 2017, $16,063 and $9,032 of deferred financing costs, respectively, were presented as a direct deduction within the outstanding debt balance in the Company’s Condensed Consolidated Balance Sheet. Amortization expense for deferred financing costs was $666 and $580 for the three months ended June 30, 2018 and 2017, respectively, and $1,239 and $1,153 for the six months ended June 30, 2018 and 2017, respectively. This amortization expense is recorded as a component of Interest expense in the Condensed Consolidated Statements of Operations.
Effective June 5, 2018, the portion of the unamortized deferred financing costs for the $400 Million Credit Facility and 2014 Term Loan Facilities that was identified as a debt modification, rather than an extinguishment of debt, is being amortized over the life of the $460 Million Credit Facility in accordance with ASC 470-50.
$460 Million Credit Facility
On May 31, 2018, the Company entered into a five-year senior secured credit facility for an aggregate amount of up to $460,000 (the “$460 Million Credit Facility”) with Nordea Bank AB (publ), New York Branch (“Nordea”), as Administrative Agent and Security Agenty, the various lenders party thereto, and Nordea, Skandinaviska Enskilda Banken AB (publ), ABN AMRO Capital USA LLC, DVB Bank SE, Crédit Agricole Corporate & Investment Bank, and Danish Ship Finance A/S as Bookrunners and Mandated Lead Arrangers. Deutsche Bank AG Filiale Deutschlandgesch äft, and CTBC Bank Co. Ltd. are Co-Arrangers under the $460 Million Credit Facility. On June 5, 2018, proceeds of $460,000 under the $460 Million Credit Facility were used, together with cash on hand, to refinance all of the Company’s existing credit facilities (the $400 Million Credit Facility, $98 Million Credit Facility and 2014 Term Loan Facilities. as defined below) into one facility, and pay down the debt on seven of the Company’s oldest vessels, which have been identified for sale.
As of June 30, 2018, there was no availability under the $460 Million Credit Facility. Total debt repayments of $0 were made during the three and six months ended June 30, 2018 and 2017, respectively, under the $460 Million Credit Facility. As of June 30, 2018 and December 31, 2017, the total outstanding net debt balance was $443,937 and $0, respectively.
The $460 Million Credit Facility provides for the following key terms:
·
The final maturity date of the $460 Million Credit Facility is May 31, 2023.
·
Borrowings under the $460 Million Credit Facility will bear interest at the London Interbank Offered Rate (“LIBOR”) plus 3.25% through December 31, 2018 and LIBOR plus a range of 3.00% and 3.50% thereafter, dependent upon the Company’s ratio of total net indebtedness to the last twelve months EBITDA. Schedule amortization payments are $15,000 per quarter commencing on December 31, 2018, with a final payment of $190,000 due on the maturity date.
·
Scheduled amortization payments may be recalculated upon the Company’s request based on changes in collateral vessels, prepayments of the loan made as a result of a collateral vessel disposition as part of the Company’s fleet renewal program, or voluntary prepayments, subject in each case to a minimum repayment profile under which the loan will be repaid to nil when the average age of the vessels serving as collateral from time to time reaches 17 years. Mandatory prepayments are applied to remaining amortization payments pro rata, while voluntary prepayments are applied to remaining amortization payments in order of maturity.
·
Acquisitions and additional indebtedness are allowed subject to compliance with financial covenants, a collateral maintenance test, and other customary conditions.
·
Dividends may be paid after December 31, 2018 (or potentially earlier if the Company elects to change the date of its first amortization payment due December 31, 2018 to an earlier date) subject to customary conditions and a limitation of 50% of consolidated net income for the quarter preceding such dividend payment if the collateral maintenance test ratio is 200% or less for such quarter.
·
Collateral vessels can be sold or disposed of without prepayment of the loan if a replacement vessel or vessels meeting certain requirements are included as collateral within 120 days of such sale or disposition. In addition:
·
we must be in compliance with the collateral maintenance test;
·
the replacement vessels must become collateral for the loan; and either
·
the replacement vessels must have an equal or greater appraised value that the collateral vessels for which they are substituted, or
·
ratio of the aggregate appraised value of the collateral vessels (including replacement vessels) to the outstanding loan amount after the collateral disposition (accounting for any prepayments of the loan by the time the replacement vessels become collateral vessels) must equal or exceed the aggregate appraised value of the collateral vessels to the outstanding loan before the collateral disposition.
·
Key financial covenants include:
·
minimum liquidity, with unrestricted cash and cash equivalents to equal or exceed the greater of $30 million and 7.5% of total indebtedness (no restricted cash is required);
·
minimum working capital, with consolidated current assets (excluding restricted cash) minus consolidated current liabilities (excluding the current portion of long-term indebtedness) to be not less than zero;
·
debt to capitalization, with the ratio of total indebtedness to total capitalization to be not more than 70%; and
·
collateral maintenance, with the aggregate appraised value of collateral vessels to be at least 135% of the principal amount of the loan outstanding under the $460 Million Credit Facility.
·
Collateral includes the current vessels in the Company’s fleet other than the seven oldest vessels in the fleet which have been identified for sale, collateral vessel earnings and insurance, and time charters in excess of 24 months in respect of the collateral vessels.
As of June 30, 2018, the Company believed it was in compliance with all of the financial covenants under the $460 Million Credit Facility.
$400 Million Credit Facility
On November 10, 2016, the Company entered into a senior secured term loan facility, the $400 Million Credit Facility, in an aggregate principal amount of up to $400,000 with Nordea Bank Finland plc, New York Branch, Skandinaviska Enskilda Banken AB (publ), DVB Bank SE, ABN AMRO Capital USA LLC, Crédit Agricole Corporate and Investment Bank, Deutsche Bank AG Filiale Deutschlandgeschäft, Crédit Industriel et Commercial and BNP Paribas. On November 15, 2016, the proceeds under the $400 Million Credit Facility were used to refinance six of the Company’s prior credit facilities. The $400 Million Credit Facility was collateralized by 45 of the Company’s vessels and at December 31, 2016, required the Company to sell five remaining unencumbered vessels, which were sold during the year ended December 31, 2017. Refer to Note 4 — Vessel Acquisitions and Dispositions. On November 14, 2016, the Company borrowed the maximum available amount of $400,000.
The $400 Million Credit Facility had maturity date of November 15, 2021, and the principal borrowed under the facility bore interest at the LIBOR for an interest period of three months plus a margin of 3.75%. The Company had the option to pay 1.50% of such rate in-kind (“PIK interest”) through December 31, 2018, of which was payable on the maturity date of the facility. The Company opted to make the PIK interest election through September 29, 2017 and as of June 30, 2018 and December 31, 2017, had recorded $0 and $5,341 of PIK interest which was recorded in Long-term debt in the Condensed Consolidated Balance Sheet as of December 31, 2017. The $400 Million Credit Facility originally had scheduled amortization payments of (i) $100 per quarter through December 31, 2018, (ii) $7,610 per quarter from March 31, 2019 through December 31, 2020, (iii) $18,571 per quarter from March 31, 2021 through September 30, 2021 and (iv) $282,605 upon final maturity on November 15, 2021, which did not include PIK interest. Pursuant to the credit facility agreement, upon the payment of any excess cash flow to the lenders (see below), the scheduled repayments were adjusted to reflect the reduction of future amortization amounts.
There was no collateral maintenance testing for the $400 Million Credit Facility prior to June 30, 2018. Thereafter, there was to be required collateral maintenance testing with a gradually increasing threshold calculated as the value of the collateral under the facility as a percentage of the loan outstanding as follows: 105% from June 30, 2018 to December 30, 2018, 115% from December 31, 2018 to December 30, 2020 and 135% thereafter.
The $400 Million Credit Facility required the Company to comply with a number of covenants substantially similar to those in the Company’s other credit facilities, including financial covenants related to debt to total book capitalization, minimum working capital, minimum liquidity, and dividends; collateral maintenance requirements (as described above); and other customary covenants. The Company was required to maintain a ratio of total indebtedness to total capitalization of not greater than 0.70 to 1.00 at all times. Minimum working capital as defined in the $400 Million Credit Facility was not to be less than $0 at all times. The $400 Million Credit Facility had minimum liquidity requirements at all times for all vessels in its fleet of (i) $250 per vessel to and including December 31, 2018, (ii) $400 per vessel from January 1, 2019 to and including December 31, 2019 and (iii) $700 per vessel from January 1, 2020 and thereafter. The Company was prohibited from paying dividends without lender consent through December 31, 2020. The Company was able establish non-recourse subsidiaries to incur indebtedness or make investments, but it was restricted from incurring indebtedness or making investments (other than through non-recourse subsidiaries). Excess cash from the collateralized vessels under the $400 Million Credit Facility was subject to a cash sweep. The cash flow sweep was 100% of excess cash flow through December 31, 2018, 75% through December 31, 2020 and the lesser of 50% of excess cash flow or an amount that would reflect a 15-year average vessel age repayment profile thereafter; provided no prepayment under the cash sweep was required from the first $10,000 in aggregate of the prepayments otherwise required under the cash sweep. During the three and six months ended June 30, 2018, the Company repaid $4,094 and $15,428 , respectively, for the excess cash flow sweep.
At June 30, 2018 and December 31, 2017, the Company had deposited $0 and $11,180, respectively, that has been reflected as noncurrent restricted cash which represents restricted pledged liquidity amounts pursuant to the $400 Million Credit Facility.
Total debt repayments of $393,507 (which includes $5,341 of PIK interest) and $100 were made during the three months ended June 30, 2018 and 2017, respectively, and total debt repayments of $404,941 (which includes $5,341 of PIK interest) and $200 were made during the six months ended June 30, 2018 and 2017, respectively, under the $400 Million Credit Facility.
On June 5, 2018, the $400 Million Credit Facility was refinanced with the $460 Million Credit Facility; refer to the “$460 Million Credit Facility” section above. As of June 30, 2018 and December 31, 2017, the total outstanding net debt balance, including PIK interest as defined below, was $0 and $398,609, respectively.
$98 Million Credit Facility
On November 4, 2015, thirteen of the Company’s wholly-owned subsidiaries entered into a Facility Agreement, by and among such subsidiaries as borrowers (collectively, the “Borrowers”); Genco Holdings Limited, a newly formed direct subsidiary of Genco of which the Borrowers are direct subsidiaries (“Holdco”); certain funds managed or advised by Hayfin Capital Management, Breakwater Capital Ltd, or their nominee, as lenders; and Hayfin Services LLP, as agent and security agent (the “$98 Million Credit Facility”). The Borrowers borrowed the maximum available amount of $98,271 under the facility on November 10, 2015.
Borrowings under the facility were available for working capital purposes. The facility had a final maturity date of September 30, 2020, and the principal borrowed under the facility bore interest at LIBOR for an interest period of three months plus a margin of 6.125% per annum. The facility had no fixed amortization payments for the first two years and fixed amortization payments of $2,500 per quarter thereafter. To the extent the value of the collateral under the facility was 182% or less of the loan amount outstanding, the Borrowers were to prepay the loan from earnings received from operation of the thirteen collateral vessels after deduction of the following amounts: costs, fees, expenses, interest, and fixed principal repayments under the facility; operating expenses relating to the thirteen vessels; and the Borrowers’ pro rata share of general and administrative expenses based on the number of vessels they owned.
The Facility Agreement required the Borrowers and, in certain cases, the Company and Holdco to comply with a number of covenants substantially similar to those in the other credit facilities of Genco and its subsidiaries, including financial covenants related to maximum leverage, minimum consolidated net worth, minimum liquidity, and dividends; collateral maintenance requirements; and other customary covenants. The Company was prohibited from paying dividends under this facility until December 31, 2018. Following December 31, 2018, the amount of dividends the Company could pay was limited based on the amount of the repayment of at least $25,000 of the loan under such facility, as well as the ratio of the value of vessels and certain other collateral pledged under such facility. The Facility Agreement included usual and customary events of default and remedies for facilities of this nature.
Borrowings under the facility were secured by first priority mortgage on the vessels owned by the Borrowers, namely the Genco Constantine, the Genco Augustus, the Genco London, the Genco Titus, the Genco Tiberius, the Genco Hadrian, the Genco Knight, the Genco Beauty, the Genco Vigour, the Genco Predator, the Genco Cavalier, the Genco Champion, and the Genco Charger, and related collateral. Pursuant to the Facility Agreement and a separate Guarantee executed by the Company, the Company and Holdco were acting as guarantors of the obligations of the Borrowers and each other under the Facility Agreement and its related documentation.
On November 15, 2016, the Company entered into an Amending and Restating Agreement which amended and restated the credit agreements and the guarantee for the $98 Million Credit Facility (the “Restated $98 Million Credit Facility”). The Restated $98 Million Credit Facility provided for the following: reductions in the minimum liquidity requirements consistent with the $400 Million Credit Facility, except the minimum liquidity amount for the collateral vessels under this facility was $750 per vessel, which was reflected as restricted cash; netting of certain amounts against the measurements of the collateral maintenance covenant, which remained in place with a 140% value to loan threshold; a portion of amounts required to be maintained under the minimum liquidity covenant for this facility may, under certain circumstances, have been used to prepay the facility to maintain compliance with the collateral maintenance covenant; elimination of the original maximum leverage ratio and minimum net worth covenants; and restrictions on incurring indebtedness, making investments (other than through non-recourse subsidiaries) or paying dividends, similar to those provided for in the $400 Million Credit Facility. The minimum working capital and the total indebtedness to total capitalization were the same as the $400 Million Credit Facility.
As of June 30, 2018 and December 31, 2017, the Company had deposited $0 and $7,234, respectively, that was reflected as current restricted cash. As of June 30, 2018 and December 31, 2017, the Company had deposited $0 and $11,738, respectively, that was reflected as noncurrent restricted cash. These amounts included certain restricted deposits associated with the Debt Service Account, Capex Account and minimum liquidity amount as defined in the $98 Million Credit Facility.
Total debt repayments of $91,397 and $0 were made during the three months ended June 30, 2018 and 2017, respectively, and total debt repayments of $93,939 and $0 were made during the six months ended June 30, 2018 and 2017, respectively, under the $98 Million Credit Facility.
On June 5, 2018, the $98 Million Credit Facility was refinanced with the $460 Million Credit Facility; refer to the “$460 Million Credit Facility” section above. As of June 30, 2018 and December 31, 2017, the total outstanding net debt balance was $0 and $92,569, respectively.
2014 Term Loan Facilities
On October 8, 2014, Baltic Trading and its wholly-owned subsidiaries, Baltic Hornet Limited and Baltic Wasp Limited, each entered into a loan agreement and related documentation for a credit facility in a principal amount of up to $16,800 with ABN AMRO Capital USA LLC and its affiliates (the “2014 Term Loan Facilities”) to partially finance the newbuilding Ultramax vessel that each subsidiary acquired, namely the Baltic Hornet and Baltic Wasp, respectively. Amounts borrowed under the 2014 Term Loan Facilities were not allowed to be reborrowed. The 2014 Term Loan Facilities had a ten-year term, and the facility amount was to be the lowest of 60% of the delivered cost per vessel, $16,800 per vessel, and 60% of the fair market value of each vessel at delivery. The 2014 Term Loan Facilities were insured by the China Export & Credit Insurance Corporation (Sinosure) in order to cover political and commercial risks for 95% of the outstanding principal plus interest, which was recorded in deferred financing fees. Borrowings under the 2014 Term Loan Facilities bore interest at the three or six-month LIBOR rate plus an applicable margin of 2.50% per annum. Borrowings were to be repaid in 20 equal consecutive semi-annual installments of 1/24 of the facility amount plus a balloon payment of 1/6 of the facility amount at final maturity. Principal repayments commenced six months after the actual delivery date for each respective vessel.
Borrowings under the 2014 Term Loan Facilities were secured by liens on the vessels acquired with borrowings under these facilities, namely the Baltic Hornet and Baltic Wasp, and other related assets. The Company guaranteed the obligations of the Baltic Hornet and Baltic Wasp under the 2014 Term Loan Facilities.
On November 15, 2016, the Company entered into Supplemental Agreements with lenders under our 2014 Term Loan Facilities which, among other things, amended the Company’s collateral maintenance covenants under the 2014 Term Loan Facilities to provide that such covenants would not be tested through December 30, 2017 and the minimum collateral value to loan ratio was 100% from December 31, 2017, 105% from June 30, 2018, 115% from December 31, 2018 and 135% from December 31, 2019. These Supplemental Agreements also provided for certain other amendments to the 2014 Term Loan Facilities, which included reductions in the minimum liquidity requirements consistent with the $400 Million Credit Facility and restrictions on incurring indebtedness, making investments (other than through non-recourse subsidiaries) or paying dividends, similar to the $400 Million Credit Facility. Additionally, the minimum working capital required was the same as under the $400 Million Credit Facility. Lastly, the maximum leverage requirement was equivalent to the debt to total capitalization requirement in the $400 Million Credit Facility.
Total debt repayments of $24,863 and $700 were made during the three months ended June 30, 2018 and 2017, respectively, and total debt repayments of $25,544 and $1,381 were made during the six months ended June 30, 2018 and 2017, respectively, under the 2014 Term Loan Facilities.
On June 5, 2018, the 2014 Term Loan Facilities were refinanced with the $460 Million Credit Facility; refer to the “$460 Million Credit Facility” section above. At June 30, 2018 and December 31, 2017, the total outstanding net debt balance was $0 and $24,214, respectively.
Interest rates
The following table sets forth the effective interest rate associated with the interest expense for the Company’s debt facilities noted above, including the cost associated with unused commitment fees, if applicable. The following table also includes the range of interest rates on the debt, excluding the impact of unused commitment fees, if applicable:
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2018
2017
2018
2017
Effective Interest Rate
6.25
%
5.27
%
6.04
%
5.14
%
Range of Interest Rates (excluding unused commitment fees)
4.06 % to 8.43
%
3.50 % to 7.42
%
3.83 % to 8.43
%
3.36 % to 7.42
% |
