In a conference call with investors,management was forced to defend a forecast that focused on positivedevelopments in the dry-bulk market and emerging trends that could drive whatCFO John Wobensmith described as a “meaningful recovery” by 2014.
While Genco believes its spot marketstrategy will pave a path toward a brighter tomorrow when rates recover many WallStreet observers are starting to question the New York-listed company’s abilityto tackle the challenges of today.
Thursday afternoon, Erik Nikolai Stavseth ofArctic Securities issued a research note in which he warned clients that “morered quarters” may be on the horizon and criticised top brass for failing toaddress what he called more “pressing issues” during the call.
“Although we also see a positive marketdevelopment in dry bulk over the next 12 to 24 months, the upturn will have tobe sharp to lift Genco out of the red,” he said, adding: “At some point Genco will have to deal withits balance sheet.”
Stavseth, like many of his peers, fears the marketdownturn will outlive an amortisationholiday that doesn’t expire until 2014 but believes debt covenants will likelyneed to be addressed sooner rather than later.
WhenMichael Webber of Wells Fargo Securities pressed Wobensmith about whether negotiationswith lenders are in the works the executive said management doesn’t intend to “waitfor the last minute” but declined to elaborate further.
Later in the day, the analyst toldclients: “We do not expect Genco to regain compliance with its net debt to Ebitdacovenant when it is reinstated, likely leading to additional negotiations withlenders.
"To be fair, this is something managementis well aware of, and actively looking to work around. That said, an investmentin Genco equity (at this point) still puts investors in front of that eventualrenegotiation, which we think will be more arduous than the last.”
