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Genco Shipping & Trading Plan Filed

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Genco Shipping and Trading filed with the U.S. Bankruptcy Court a Chapter 11 Prepackaged Plan of Reorganization and related Disclosure Statement. According to the Disclosure Statement, “The Plan and this Disclosure Statement are the result of months of discussions followed by extensive and vigorous negotiations among the Company, its primary secured lenders and an ad hoc group of Convertible Noteholders. The culmination of these negotiations was the entry into a Restructuring Support Agreement, upon which the Plan is premised, by the Company and the holders of approximately 93% of the principal amounts of the Prepetition 2007 Facility, 100% of the principal amount of the Prepetition $253 Million Facility and the Prepetition $100 Million Facility, and approximately 74% of the principal amount of the Convertible Notes. The Plan substantially deleverages the Company’s balance sheet by converting approximately $1.2 billion of debt into equity of the Reorganized Genco and will provide the Company with $100 million of additional liquidity through a fully-backstopped rights offering. As part of the overall settlement embodied in the Restructuring Support Agreement and the Plan, the Prepetition 2007 Facility Lenders and the Convertible Noteholders are voluntarily foregoing their right to part of the distribution they are otherwise entitled to receive so that the Debtors can provide warrants to holders of Equity Interests in Genco in exchange for the surrender or cancellation of their Equity Interest in Genco. The key components of the Plan are as follows: The conversion of 100% of the Claims under the Prepetition 2007 Facility into 81.1% of the Reorganized Genco’s new common stock. Holders of Prepetition 2007 Facility Claims will also be entitled to subscribe to and purchase up to 80% of the New Genco Common Stock being offered under the Rights Offering. Entry into the Amended and Restated $100 Million Facility and the Amended and Restated $253 Million Facility, which extend the maturity dates of those prepetition facilities through August 2019 and provide other modifications to the existing credit agreements; The conversion of 100% of the Claims under the Convertible Notes into 8.4% of the Reorganized Genco’s new common stock. Holders of Convertible Note Claims will also be entitled to subscribe to and purchase up to 20% of the New Genco Common Stock being offered under the Rights Offering. Equity Interests in Genco will receive the New Genco Equity Warrants from amounts otherwise distributable to the Prepetition 2007 Facility Lenders and the holders of the Convertible Notes in exchange for the cancellation or surrender of Equity Interests in Genco. A $100 million Rights Offering, 80% of which will be backstopped by certain of the Prepetition 2007 Facility Lenders, and 20% of which will be backstopped by certain of the Convertible Noteholders. The Company and the parties to the Restructuring Support Agreement believe that the proposed restructuring under the Plan is extremely favorable for all stakeholders because it achieves a substantial deleveraging of the Company’s balance sheet (approximately $1.2 billion) through consensus with the overwhelming majority of the Company’s creditors and eliminates potential deterioration of value – and disruptions to worldwide operations – that could otherwise result from a protracted and contentious bankruptcy case. This complete conversion of debt-to-equity generates over $200 million of cash flow annually due to the reduced interest and amortization expense. Importantly, the Company would not be able to implement the conversion of debt-to-equity proposed under the Plan without the support of its creditor constituents….In sum, the Plan embodies a settlement, including a distribution to current equity holders on account of the surrender or cancellation of their Equity Interests in Genco from value that would otherwise be distributable to the Company’s creditors as part of an expeditious and consensual restructuring. This avoids potential litigation that could decrease value for all stakeholders and delay (and possibly derail) the restructuring process – including the cessation of international operations from vessel arrests or loss of charter hires that, in turn, would devastate future revenues. The significant support obtained by the Company pursuant to the Restructuring Support Agreement provides a fair and reasonable path for an expeditious consummation of the Plan and the preservation of ordinary course of business.”

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