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Exhibit 99.1

 

KRAMER LEVIN NAFTALIS & FRANKEL LLP

Kenneth H. Eckstein

Adam C. Rogoff

Stephen D. Zide

Anupama Yerramalli

1177 Avenue of the Americas

New York, New York  10036

Telephone: (212) 715-9100

Facsimile: (212) 715-8000

Counsel for the Debtors and Debtors in Possession

 

CONSOLIDATED MONTHLY OPERATING REPORT

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1.

Introduction.

On April 21, 2014 (the “Petition Date”) Genco Shipping & Trading Limited (“Genco”), and its affiliated debtors in the above-referenced chapter 11 cases (collectively, the “Chapter 11 Cases”), as debtors and debtors-in-possession (collectively, the “Debtors” or the “Company”), filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). The Debtors are operating their business and managing their property as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee or examiner has been appointed in these Chapter 11 Cases.  On May 9, 2014, the United States Trustee for the Southern District of New York appointed a statutory committee of equity security holders to section 1102(a)(1) of the Bankruptcy Code.

2.

Consolidated Reports.

On April 23, 2014, the Bankruptcy Court entered an order directing procedural consolidation and joint administration of these Chapter 11 Cases [Docket No. 29] (the “Joint Administration Order”).  Pursuant to discussions with the Office of the United States Trustee, the Debtors are filing their monthly operating reports on a consolidated basis.

For financial reporting purposes, the Debtors and their non-debtor affiliates (the “Non-Debtors”) historically prepared financial statements on a consolidated basis. Unlike those consolidated financial statements, this Monthly Operating Report reflects the Debtors’ reasonable efforts to report financial information and the disbursements of each of the Debtors on a non-consolidated basis, and, accordingly, does not include financial information relating to the Non-Debtors.

The disbursements reported on MOR-1 reflect the Debtors’ reasonable efforts to report disbursements made on behalf of a Debtor by another Debtor or Non-Debtor as if such a disbursement was actually made by the Debtor on whose behalf the disbursement was made. For example, payments relating to a vessel owned by one Debtor may have been made by a Non-Debtor or another Debtor and, as such, the payment has been listed as if made by the vessel owning Debtor. Nothing herein constitutes an admission that the Debtor entity is the obligor of such payment, and the Debtors reserve all rights to reclassify any disbursement, payment, or obligation as belonging to another entity.

3.

GAAP.

The financial statements and supplemental information contained herein are preliminary, unaudited, and may not comply with generally accepted accounting

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principles in the United States of America (“GAAP”) in all material respects.  In addition, the financial statements and supplemental information contained herein represent the condensed, combined information for all Debtor entities only and exclude all non-Debtor affiliates. The financial statements and supplemental information contained herein are currently being reviewed and remain subject to year-end audit and other adjustments.

The unaudited combined financial statements have been derived from the books and records of the Debtors.  This information, however, has not been subject to certain procedures that would typically be applied to financial information presented in accordance with GAAP, and upon application of such procedures (such as tests for asset impairment), the Debtors believe that the financial information could be subject to changes, and these changes could be material. The information furnished in this report includes primarily normal recurring adjustments but does not include all adjustments that would typically be made for financial statements presented in accordance with GAAP.

4.

Prepetition Financial Reporting.

Genco is a publicly-held corporation, the common shares of which traded prior to the Petition Date on the New York Stock Exchange under the symbol “GNK” and currently trade in the over-the-counter market under the symbol “GNKOQ.” For financial reporting purposes, Genco prepares consolidated quarterly and annual financial statements, including the Debtors and the Non-Debtors, that are filed with the U.S. Securities and Exchange Commission (the “SEC”). The quarterly financial statements are unaudited and the annual financial statements are audited. Unlike the consolidated financial statements, the financial information reported in this Monthly Operating Report has not been prepared in accordance with GAAP and does not include financial information regarding the Non-Debtors (except to the extent a disbursement has been made by a Non-Debtor on behalf of a Debtor). In addition, this Monthly Operating Report does not include information that may be relevant to the time period covered by this Monthly Operating Report but is currently unknown to the Debtors and may become known in the future. Accordingly, the financial statements contained in this Monthly Operating Report do not purport to be prepared in accordance with GAAP, nor are they intended to fully reconcile to or be comparable with the financial statements filed by Genco with the SEC.

5.

General Methodology.

The Debtors prepared this Monthly Operating Report relying primarily upon the information set forth in their books and records. Consequently, certain transactions that are not identified in the normal course of business in the Debtors’ books and records may not be included in this Monthly Operating Report. Nevertheless, in preparing this Monthly Operating Report, the Debtors made reasonable efforts to supplement the information set forth in their books and records with additional information concerning transactions that may not have been identified therein.

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This Monthly Operating Report covers the reporting period of April 21, 2014 through May 31, 2014 and includes disbursements for that period.  Pursuant to discussions with the Office of the United States Trustee, the Monthly Operating Report does not contain income statement information for the period of April 21, 2014 through April 30, 2014 due to the administrative burden preparing that information would cause on the estates.  For the same reason, the Accounts Receivable Reconciliation and Aging Monthly Operating Report covers May 1, 2014 through May 31, 2014, with April 30, 2014 as the starting point.

6.

Past Performance.

The results of operations reported in this Monthly Operating Report are not necessarily indicative of results which may be expected for any other period or for the full year and may not necessarily reflect the consolidated results of operations and financial position of the Debtors in the future.

7.

Prepetition vs. Postpetition Liabilities.

The Debtors allocated liabilities between the prepetition and postpetition periods based on the information available and research conducted in connection with the preparation of this Monthly Operating Report. As additional information becomes available and further research is conducted, the Debtors’ allocation of liabilities between the prepetition and postpetition periods may change. The liability information, except as otherwise noted, is listed as of the close of business as of the end of the month. Accordingly, the Debtors reserve all rights to amend, supplement or otherwise modify this Monthly Operating Report as necessary and appropriate, but shall be under no obligation to do so.

The Debtors have paid certain undisputed prepetition liabilities in accordance with orders approved by the Bankruptcy Court authorizing such payments. The Debtors believe that all undisputed postpetition accounts payable have been and are being paid according to agreed-upon terms specific to each vendor and/or service provider. Any aged amounts represent items subject to valid disputes, and certain items which have been paid subsequent to the end of the reporting period.

Specifically, the accounts payable of $3,141,736 due on May 31, 2014 to third-party technical ship managers has been excluded from the Summary of Unpaid Postpetition Debts.  The Debtors are unable to determine the allocation between prepetition and postpetition amounts owing to these technical ship managers because the reconciliation of invoices occurs over the course of several months.  The Debtors are authorized to make ongoing payment upon reconciliation pursuant to order of the Court.  Therefore, these payments have been included in the Schedule of Cash Receipts and Disbursement for the reporting period.

In addition, the liabilities reported in this Monthly Operating Report do not reflect any analysis conducted by the Debtors regarding potential claims under

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section 503(b)(9) of the Bankruptcy Code. Accordingly, the Debtors reserve any and all of their rights to dispute or challenge the validity of any claims asserted under section 503(b)(9) of the Bankruptcy Code or the characterization of the structure of any transaction, document or instrument related to any creditor’s claim.

8.

Net Book Value of Assets.

9.

Intercompany Transactions.

Intercompany transactions among the Debtors, as well as between the Debtors and the Non-Debtors, include ordinary course intercompany cash transfers, payments made and/or funded on behalf of the other entities and investments in subsidiaries. The intercompany balances due to/from Debtor entities have been eliminated in the accompanying combined balance sheet. Intercompany transactions between the Debtor entities have similarly been eliminated in the accompanying interim condensed, combined statement of operations and balance sheet.

10.

Payments to Insiders.

In addition to the payments to insiders disclosed on MOR-6, the Debtors may make distributions to creditors that have common directors with the Debtors (collectively, the “Associated Entities”) during the relevant reporting period. In preparing the Schedules and Statements, the Debtors endeavored to identify all such Associated Entities. Because the Associated Entities do not meet the definition of “insider” as defined in section 101(31) of the Bankruptcy Code, any payments to the Associated Entities are not disclosed on MOR-6.

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11.

Payments to Professionals.

The Debtors have disclosed amounts billed by professionals compensated by the Debtors’ estate on MOR-6 to the extent that the Debtors have received invoices for such services during the relevant reporting period.  Any unbilled amounts by professionals will be included in subsequent Monthly Operating Reports.

12.

Liabilities Subject to Compromise

On April 30, 2014, DNB Bank ASA (“DNB”) terminated its swap agreement with the Debtors. The Debtors have received a proof of claim from DNB, in which it seeks secured status, in the amount of $5,621,680.  The Debtors are evaluating this claim and, for the purposes of this Monthly Operating Report, the claimed amount is included within Liabilities Subject to Compromise.  The amount recorded is subject to change and further reconciliation as the Debtors evaluate the claim.   The presentation within this Monthly Operating Report does not constitute an admission or waiver of any rights or claims of the Debtors to challenge claim amount.

13.

Liabilities Not Subject to Compromise.

As a result of the commencement of these Chapter 11 Cases, the payment of prepetition indebtedness is subject to compromise or other treatment under a chapter 11 plan. Generally, actions to enforce or otherwise effect payment of pre-commencement liabilities are stayed. Although payment of prepetition claims generally is not permitted, the Bankruptcy Court has entered several orders authorizing the Debtors to pay certain prepetition claims in designated categories and subject to certain terms and conditions. This relief generally was designed to preserve the value of the Debtors’ businesses and assets. To the extent such claims have not been categorized as “Liabilities Subject to Compromise,” the Debtors reserve their right to dispute their obligation to make such payments.

The Debtors have been paying and intend to continue to pay undisputed postpetition claims in the ordinary course of business.

14.

Reservation of Rights.

Given the complexity of the Debtors’ business, inadvertent errors, omissions or over-inclusion of contracts or leases may have occurred. Accordingly, the Debtors hereby reserve all of their rights to dispute the validity, status, enforceability, or executory nature of any claim amount, representation or other statement in this Monthly Operating Report and reserve the right to amend or supplement this Monthly Operating Report, if necessary, but shall be under no obligation to do so.

Nothing contained in this Monthly Operating Report shall constitute a waiver of the Debtors’ rights or an admission with respect to these Chapter 11 Cases, including with respect to any issues involving the Debtors’ ownership interests,

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substantive consolidation, equitable subordination, defenses and/or causes of action arising under the provisions of chapter 5 of the Bankruptcy Code, and any other relevant non-bankruptcy laws.

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UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

Monthly Operating Report for the Period

From May 1, 2014 through May 31, 2014

I declare under penalty of perjury (28 U.S.C. Section 1746) that this report and the attached documents are true and correct to the best of my knowledge and belief.

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UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

1 - For status of post-petition tax payments, see disclosures as noted on MOR-4.  Due to the level of detailed records, (i) copies of IRS Form 6123 or payment receipts;  (ii) copies of tax returns filed during the reporting period and (iii) a taxes reconciliation and aging schedule will be made available upon request.

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NOTES TO MONTHLY OPERATING REPORT

The Monthly Operating Report includes activity from the following Debtors:

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SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS

(1) Intercompany Receipts includes transfers from Debtor entities.  No transfers from non-Debtor entities are included in these amounts.

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SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS

(1) The Total disbursement Column includes the net of any payments made on behalf of other entities. For example, if Genco Shipping & Trading Limited ("GST") makes a payment on behalf of another debtor the total disbursements for that debtor have been increased and GST's total disbursement has been reduced.

(2) Intercompany Disbursements includes transfers to Debtor entities.  No transfers to non-Debtor entities are included in these amounts.

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BANK RECONCILIATIONS (1), (2)

Notes

(1) - The Debtors have not included copies of bank statements or cash disbursements journals due to the voluminous nature of such documents.

(2) - The Debtors reconcile their bank accounts on a monthly basis

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STATEMENT OF OPERATIONS

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BALANCE SHEET

 

(This Balance Sheet is subject to the disclaimers and notes annexed hereto, specifically Notes 3 and 8.)

 

The amounts included herein are consistent with the Debtors’ accounting practices and, as such, and in some instances may be based upon the asserted liability by the creditor (including pursuant to a proof of claim), and do not constitute an admission of the validity or amount of any claim asserted against the Debtors.  Nothing contained herein reflects an agreed amount or allowance of any claim.

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STATUS OF POST-PETITION TAXES ²

Notes

1 - Negative balances appearing in Beginning or Ending Tax column represents pre-paid taxes.

2 - The Debtors believe they are paying all undisputed taxes and preparing and filing all returns when due or obtaining extensions where necessary.

3 - The Debtors do not own any real property. Real estate taxes paid by the Debtors are paid as part of an underlying lease obligation and the failure to pay such lease payments would not result in claims by the taxing authority against the Debtors.

SUMMARY OF UNPAID POST-PETITION DEBTS ¹

Notes:

 

1 -  The Debtors believe they are paying all undisputed post-petition obligations according to terms.  Aged amounts represent items subject to valid disputes, and certain items which have been paid subsequent to the end of the reporting period.

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ACCOUNTS RECEIVABLE RECONCILIATION AND AGING

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PAYMENTS TO INSIDERS AND PROFESSIONALS

Of the total disbursements shown on the Cash Receipts and Disbursements Report (MOR-1) list the amount paid to insiders (as defined in Section 101(31) (A)-(F) of the U.S. Bankruptcy Code) and to professionals.  For payments to insiders, identify the type of compensation paid (e.g. Salary, Bonus, Commissions, Insurance, Housing Allowance, Travel, Car Allowance, Etc.).  Attach additional sheets if necessary.

 

1 - The engagement of Sidley Austin LLP is subject to approval by the court.

POST-PETITION STATUS OF SECURED NOTES, LEASES PAYABLE AND ADEQUATE PROTECTION PAYMENTS

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DEBTOR QUESTIONNAIRE