Gener8 Maritime reports 3Q loss

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Gener8 Maritime, Inc., a leading U.S.-based provider of international seaborne crude oil transportation services, announced its financial results for the three months and nine months ended September 30, 2017.

Highlights

-Recorded net loss of $67.5 million, or $0.81 basic and diluted loss per share, for the three months ended September 30, 2017, compared to a net loss of $37.4 million, or $0.45 basic and diluted loss per share for the same period in the prior year.
-Recorded adjusted net loss of $32.1 million, or $0.39 basic and diluted adjusted loss per share, for the three months ended September 30, 2017, compared to adjusted net loss of $0.7 million or $0.01 basic and diluted adjusted loss per share for the same period in the prior year.
-Increased full fleet “ECO” operating days to 57.4% in the three months ended September 30, 2017, compared to 35.6% in the same period in the prior year.
-Entered into an agreement to lower the final installment payment for the ECO VLCC newbuilding Gener8 Nestor by $19.3 million and took delivery of the vessel on October 9, 2017.
-Entered into a series of transactions that are expected to increase cash on the balance sheet by approximately $99.2 million and reduce total indebtedness by approximately $187.7 million. These transactions include:
-Sold the following vessels for net cash proceeds of $65.9 million after debt repayment of $124.0 million and release of working capital from the Navig8 pools:
-A 2002-built Aframax (Gener8 Elektra), two 1999-built Suezmax tankers (Gener8 Horn and Gener8 Phoenix), and two 2016-built VLCCs (Gener8 Noble and Gener8 Theseus)
-Subsequent to the end of the quarter, sold or entered into agreements to sell the following vessels for expected net cash proceeds of $33.2 million after debt repayment of $63.8 million and release of working capital from the Navig8 pools:
-A 2003-built Aframax (Gener8 Pericles), a 2000-built Suezmax (Gener8 Argus), a 2002-built VLCC (Gener8 Poseidon), and a 2010-built VLCC (Gener8 Zeus)

“We have taken a series of steps this year to enhance our fleet profile, increase liquidity, and improve our balance sheet,” said Peter Georgiopoulos, Chairman and Chief Executive Officer of Gener8 Maritime. “By the end of this year, we expect that over 75% of our fleet will be comprised of ECO VLCCs on a DWT basis. The incremental earnings potential of our ECO VLCCs has been demonstrated over a number of quarters in both weak and strong tanker markets. Combined with reduced breakeven costs resulting from our unscheduled debt repayments, we believe that we have positioned Gener8 to stay competitive in the current weak rate environment and outperform the market when it recovers.”

Leo Vrondissis, Chief Financial Officer, added, “It is important to note that almost all of the vessels we have sold this year were financed under the Company’s more expensive debt facility; this was done strategically to strengthen our balance sheet. In 2017 through the end of the third quarter, Gener8 has made unscheduled debt repayments of over $163 million, and we expect to prepay approximately $64 million of additional outstanding debt following vessel sales that have closed or are expected to close subsequent to the end of the third quarter. Also, following a period of approximately two years in which we lowered the debt outstanding in our Refi Facility from $581 million down to approximately $188 million after giving effect to the foregoing prepayments, quarterly scheduled principal repayments of this facility will decrease by approximately $11 million. The effect will be a decrease in our total quarterly scheduled debt amortization payments of approximately 33% from June 30, 2017 to the beginning of 2018, which will have a significant positive impact on our daily cash breakeven amount.”

Third Quarter 2017 Results Summary

The Company recorded net loss for the three months ended September 30, 2017 of $67.5 million, or $0.81 basic and diluted loss per share, compared to net loss of $37.4 million, or $0.45 basic and diluted loss per share, for the prior year period.

Adjusted net loss was $32.1 million, or $0.39 basic and diluted adjusted loss per share, for the three months ended September 30, 2017, compared to adjusted net loss of $0.7 million, or $0.01 basic and diluted adjusted loss per share, for the prior year period.

Adjusted EBITDA for the three months ended September 30, 2017 was $15.9 million, compared to $34.9 million for the prior year period. Please refer to the tables at the end of this press release for a reconciliation of adjusted net income and adjusted EBITDA to net income.

The average daily spot TCE rate obtained by the Company’s VLCC fleet, including its vessels that were deployed in the Navig8 pools, was $19,063 for the three months ended September 30, 2017. During the three months ended September 30, 2017, the Company’s “ECO” VLCC fleet earned an average daily TCE rate of $20,256 and the Company’s non-“ECO” VLCC fleet earned an average daily TCE rate of $12,974. The average daily TCE rate obtained by the Company on a full-fleet basis was $15,757 during the three months ended September 30, 2017, compared to $21,887 for the prior year period.

Net voyage revenues, which are voyage revenues minus voyage expenses, decreased by $21.2 million, or 30.7%, to $47.9 million for the three months ended September 30, 2017 compared to $69.1 million for the prior year period. The decrease in net voyage revenues was primarily attributable to the decrease in the Company’s average daily fleet TCE rate by $6,130, or 28.0%, to $15,757 for the three months ended September 30, 2017 compared to $21,887 for the prior year period. The decrease in the Company’s average daily fleet TCE rate resulted in a decrease in net voyage revenue of approximately $19.4 million during the three months ended September 30, 2017 compared to the prior year period.

Direct vessel operating expenses, which include crew costs, provisions, deck and engine stores, lubricating oil, insurance, and maintenance and repairs for owned vessels decreased by $0.7 million, or 2.4%, to $26.3 million for the three months ended September 30, 2017 compared to $27.0 million for the prior year period.

General and administrative expenses decreased by $0.2 million, or 2.7%, to $6.9 million for the three months ended September 30, 2017, compared to $7.1 million in the prior year period.

Depreciation and amortization increased by $2.5 million, or 11.0%, to $25.6 million for the three months ended September 30, 2017 compared to $23.1 million for the prior year period. The increase in depreciation and amortization was primarily due to an increase in vessel depreciation of $2.9 million, or 14.0%, to $23.7 million for the three months ended September 30, 2017 compared to $20.8 million in the prior year period primarily due to an increase in depreciation related to new vessel deliveries, partially offset by a decrease in depreciation due to the sale of older vessels since September 30, 2016.

Loss on disposal of vessels, net increased by $26.1 million, to $36.9 million for the three months ended September 30, 2017 compared to a loss of $10.8 million for the prior year period. The loss on disposal of vessels, net during the three months ended September 30, 2017, was primarily related to sales of the Gener8 Horn and the Gener8 Phoenix and the expected sales of the Gener8 Poseidon and Gener8 Pericles.

Net interest expense increased by $8.8 million, or 64.6%, to $22.5 million for the three months ended September 30, 2017 compared to $13.7 million for the prior year period. The increase was primarily attributable to the decrease in capitalized interest of $5.8 million, or 86.3%, to $0.9 million for the three months ended September 30, 2017 compared to $6.7 million in the prior year period related to the capitalization of interest expense associated with vessels under construction as a result of the funding of the acquisition of the Company’s VLCC newbuildings. Also contributing to the increase in interest expense, net during the three months ended September 30, 2017, was an increase of $2.6 million in amortization of deferred financing costs, primarily related to the write-off of deferred financing costs associated with the recent sales of the Gener8 Noble and Gener8 Theseus.

Other income (expense), net increased by $1.5 million, or 97.4%, to $3.0 million for the three months ended September 30, 2017 compared to $1.5 million for the prior year period. Other income (expense), net primarily included the impact of our interest rate swap agreements. During the three months ended September 30, 2017, we recognized in earnings $2.6 million, as other income (expense), net, related to the impact of our interest rate swap agreements.

As of September 30, 2017, the Company’s cash balance was $184.7 million, compared to $94.7 million as of December 31, 2016. As of September 30, 2017, the Company’s total debt was $1.4 billion and net debt was $1.2 billion. Please refer to the tables at the end of this press release for a reconciliation of net debt to total debt.

As of September 30, 2017, there were 82,988,946 shares of the Company’s common stock outstanding.

Subsequent Events

On August 21, 2017 the Company entered into agreements for the sale of the 2003-built Aframax tanker the Gener8 Pericles for gross proceeds of $11.0 million. As of September 30, 2017, the Company classified the Gener8 Pericles as Current assets – held for sale, in the condensed consolidated balance sheet. On October 18, 2017, the sale was finalized and the Company used the net proceeds to repay $7.8 million of the related portion of the senior secured debt outstanding under the Refinancing Facility associated with the vessel.

On October 9, 2017, the Company, took delivery of the Gener8 Nestor, a 2017-built VLCC newbuilding. Upon delivery, the Gener8 Nestor entered into the VL8 Pool. On October 9, 2017, the Company borrowed $48.0 million under the Korean Export Credit Facility and used $29.0 million of this amount to fund the delivery of the Gener8 Nestor. At the time of the delivery, the Company has made all shipyard installment payments and there is no outstanding payable balance.

On October 25, 2017 the Company entered into agreements for the sale of the 2010-built VLCC tanker the Gener8 Zeus for gross proceeds of $53.0 million. On November 6, 2017 the sale was finalized and the Company used the net proceeds to repay approximately $34.2 million of the related portion of the senior secured debt outstanding under the Refinancing Facility associated with the vessel.

On October 18, 2017 the Company entered into agreements for the sale of the 2000-built Suezmax tanker the Gener8 Argus for gross proceeds of $11.0 million. On October 30, 2017, the sale was finalized and the Company used the net proceeds to repay $7.7 million of the related portion of the senior secured debt outstanding under the Refinancing Facility associated with the vessel.

On November 8, 2017 the Company entered into an amendment to a term loan facility entered into on December 1, 2015 (the “Sinosure Credit Facility”) in order to conform certain financial covenants to those in the Refinancing Facility and the Korean Export Credit Facility. Pursuant to the amendment, the debt service coverage ratio, under the Sinosure Credit Facility was replaced with a conforming interest expense coverage ratio, which tests consolidated EBITDA to cash interest expense, each as defined in the Sinosure Credit Facility. The amendment also revised the consolidated leverage ratio under the Sinosure Credit Facility from 0.65 to 0.60 to conform to the other two credit facilities. As of September 30, 2017, the Company was in compliance with all financial covenants that were in effect on such date under its credit facilities.

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