FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2016

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934.

For the transition period from to

COMMISSION FILE NUMBER

001-34228

GENER8 MARITIME, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code (212) 763-5600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒  No ☐

THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER’S CLASSES OF COMMON STOCK, AS OF AUGUST 3, 2016:

Common Stock, par value $0.01 per share 82,681,711 shares

GENER8 MARITIME, INC. AND SUBSIDIARIES

INDEX

Website Information

We intend to use our website, www.gener8maritime.com, as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in our website’s Investor Relations section. Accordingly, investors should monitor the Investor Relations portion of our website, in addition to following our press releases, SEC filings, public conference calls, and webcasts. To subscribe to our e-mail alert service, please click the “Investor Alerts” link in the Investor Relations section of our website and submit your email address. The information contained in, or that may be accessed through, our website is not incorporated by reference into or a part of this document or any other report or document we file with or furnish to the SEC, and any references to our website are intended to be inactive textual references only.

PART 1: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

GENER8 MARITIME, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF

JUNE 30, 2016 AND DECEMBER 31, 2015

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)

See notes to condensed consolidated financial statements.

GENER8 MARITIME, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015

(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

(UNAUDITED)

See notes to condensed consolidated financial statements.

GENER8 MARITIME, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE three AND SIX MONTHS ENDED JUNE 30, 2016 AND 2015

(DOLLARS IN THOUSANDS)

(UNAUDITED)

See notes to condensed consolidated financial statements.

GENER8 MARITIME, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2016

(DOLLARS IN THOUSANDS)

(UNAUDITED)

See notes to condensed consolidated financial statements.

GENER8 MARITIME, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015

(DOLLARS IN THOUSANDS)

See Note 2 for supplementary information of noncash items.

See notes to condensed consolidated financial statements.

GENER8 MARITIME, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS—Incorporated on August 1, 2008, under the Laws of Republic of the Marshall Islands, Gener8 Maritime, Inc. (formerly named General Maritime Corporation) and its wholly-owned subsidiaries (collectively, the “Company”) provides international transportation services of seaborne crude oil and petroleum products. The Company’s owned fleet at June 30, 2016 consisted of 35 tankers in operation (18 Very Large Crude Carriers (“VLCCs”), 11 Suezmax tankers, four Aframax tankers, two Panamax tankers), and 10 newbuilding VLCCs under construction. The Company operates its business in one business segment, which is the transportation of international seaborne crude oil and petroleum products.

On May 7, 2015, the Company consummated a merger (“2015 merger”) pursuant to an agreement between Gener8 Maritime Acquisition, Inc., a wholly owned subsidiary of the Company, Navig8 Crude Tankers, Inc. and the equity holders’ representatives named therein. As a result of the merger, Gener8 Maritime Subsidiary Inc. (formerly known as Navig8 Crude Tankers, Inc.) became a wholly owned subsidiary of the Company, and the Company’s name was changed from General Maritime Corporation to Gener8 Maritime, Inc. The Company followed the guidance of Financial Accounting Standards Board, or “FASB,” Accounting Standards Codification, or “ASC,” Topic 805, Business Combinations. Pursuant to this, the Company accounted for the 2015 merger as an asset acquisition. For more details see Note 6, 2015 MERGER, in our 2015 Annual Report on Form 10-K.

The Company’s vessels are primarily available for employment in commercial pools, or for charter on a spot voyage or time charter basis.

The Company is party to certain commercial pooling arrangements. Commercial pools are designed to provide for effective chartering and commercial management of similar vessels that are combined into a single fleet to improve customer service, increase vessel utilization and capture cost efficiencies.

The Company employs all of its VLCC, Suezmax and Aframax vessels, with the exception of two VLCCs that remain on time and spot charters, in Navig8 Group commercial crude tanker pools including the VL8 Pool, the Suez8 Pool and the V8 Pool. In 2015, certain of the Company’s VLCC, Suezmax, Aframax and newbuilding owning subsidiaries (but not the subsidiaries for the Gener8 Victory and Gener8 Vision) entered into pool agreements with the pool managers VL8 Pool Inc. and V8 Pool Inc., subsidiaries of Navig8 Limited, the beneficial owner of over 4% of the Company’s outstanding common shares as of June 30, 2016. See Note 13, Related Party Transactions, for a description of the pool arrangements with these related parties. 

BASIS OF PRESENTATION—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of financial position and operating results, have been included in the financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s financial statements for the year ended December 31, 2015, which provides a more complete understanding of our accounting policies. The results of operations for the current and prior periods are not necessarily indicative of the operating results for the full year. The financial statements of the Company have been prepared on the accrual basis of accounting and presented in United States Dollars (USD or $) which is the functional currency of the Company. A summary of the significant accounting policies followed in the preparation of the accompanying unaudited interim financial statements, which conform to accounting principles generally accepted in the United States of America, were included in our 2015 Annual Report on Form 10-K. Except for the following new policies presented below, all accounting policies remained unchanged.

INTEREST RATE RISK MANAGEMENT—The Company is exposed to interest rate risk through its variable rate credit facilities. The Company uses interest rate swaps, under which the Company pays a fixed rate in exchange for

receiving a variable rate, to achieve a fixed rate of interest on the hedged portion of its debt in order to increase the ability of the Company to forecast interest expense. The objective of these swaps is to help to protect the Company against changes in borrowing rates on the current credit facilities and any replacement floating rate LIBOR credit facility. Upon execution of the swaps, the Company designated the hedges as cash flow hedges of benchmark interest rate risk under FASB ASC 815, Derivatives and Hedging, and the Company has established effectiveness testing and measurement processes. Changes in the fair value of the interest rate swaps are recorded as assets or liabilities, and effective gains/losses are captured in a component of accumulated other comprehensive income (“OCI”) until reclassified to interest expense when the hedged variable rate interest expenses are accrued and paid. The Company elected to classify settlement payments as operating activities within the statement of cash flow. See Notes 10, Financial Instruments, additional disclosures on the Company’s interest rate swaps.

RECENT ACCOUNTING PRONOUNCEMENTS—In April 2016, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-10—Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. ASU No. 2016-10 suggests guidance for stakeholders on identifying performance obligations and licenses in customer contracts. In May 2014, the FASB issued ASU No. 2014‑09, Revenue from Contracts with Customers. The core principle is that a company should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014‑09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, and shall be applied either retrospectively to each period presented or as a cumulative‑effect adjustment as of the date of adoption. The Company is evaluating the potential impact of this standard update on its consolidated financial statements. 

In March 2016, the FASB issued ASU 2016-09—Compensation-Stock Compensation (Topic 718). This update affects all entities that issue share-based payment awards to their employees, and involves several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liability and classification on the statement of cash flows. An entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. For public business entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. The Company is currently evaluating the effect of adoption on its financial statements and related disclosure.

In February 2016, the FASB issued ASU No. 2016-02, Leases. ASU 2016-02 is intended to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In order to meet that objective, the new standard requires recognition of the assets and liabilities that arise from leases. A lessee will be required to recognize on the balance sheet the assets and liabilities for leases with lease terms of more than 12 months. The new standard is effective for public companies for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. The Company is currently evaluating the effect that adopting this standard will have on its financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13-Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU require the measurement of all expected credit losses for financial assets, which include trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance in this ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted for interim and annual periods beginning after December 15, 2018. We are currently evaluating this ASU and any potential impacts the adoption of this ASU will have on our unaudited consolidated financial statements revised guidance for the accounting and reporting of financial instruments.

2. CASH FLOW INFORMATION

The Company excluded from cash flows from investing and financing activities in the condensed consolidated statements of cash flows items included in accounts payable and accrued expenses for accrued milestone and supervision payments of $19.2 million and $106.0 million for the period ended June 30, 2016 and December 31, 2015, respectively. The Company also excluded from cash flow from financing activities an amount included in accounts payable of $1.9 million, related to the amendment of the Sinosure Credit Facility. Capitalized interest amounted to $17.6 million for the six months ended June 30, 2016, out of which $6.3 million has not been paid out as of June 30, 2016 (which is included in Long‑term debt in the condensed consolidated balance sheet). Capitalized interest amounted to $11.5 million for the six months ended June 30, 2015.

3. INCOME PER COMMON SHARE

The computation of basic income per share is based on the weighted-average number of common shares outstanding during the year. The computation of diluted earnings per share assumes the exercise of all dilutive stock options using the treasury stock method and the lapsing of restrictions on unvested restricted stock awards, for which the assumed proceeds upon lapsing the restrictions are deemed to be the amount of compensation cost attributable to future services and not yet recognized using the treasury stock method, to the extent dilutive.

The reconciliation of basic to diluted income per common share was as follows (in thousands, except per share amounts):

On May 7, 2015, all shares of Class A Common Stock and Class B Common Stock were converted on a one-to-one basis to a single class of common stock. As a result of the conversion in 2015, and since both Class A Common Stock and Class B Common Stock had equal rights to earnings and losses, the 2016 and 2015 presentations of net income per share combine Class A Common Stock, Class B Common Stock and new common stock. Options to purchase 343,662 shares of Class A Common Stock were excluded from the above calculation for the three and six months ended June 30, 2015, because the impact is anti-dilutive. Options to purchase 309,296 shares of new common stock were excluded from the above calculation for the three and six months ended June 30, 2015 and 2016, because the impact is anti-dilutive. Also, warrants to purchase 1,431,520 shares of new common stock and options to purchase 13,420 shares of new common stock were also excluded from the above calculation for the three and six months ended June 30, 2016, because certain market conditions have not been met.

Additionally, on June 24, 2015, in connection with the pricing of the Company’s IPO, the Company granted members of management restricted stock units (“RSUs”) of the Company’s common stock pursuant to the Company’s amended 2012 Equity Incentive Plan. The remaining RSUs will vest in tranches on December 1, 2016, December 1, 2017 and December 1, 2018, subject for each increment to employment with the Company through the applicable vesting date for such increment. The RSUs were excluded in determining the diluted net income per share for the three and six months ended June 30, 2016, because the impact is anti-dilutive.

4. DELIVERY AND DISPOSAL OF VESSELS

Gener8 Apollo

On January 5, 2016, Gener8 Apollo LLC, a wholly-owned subsidiary of the Company, took delivery of the Gener8 Apollo, a 2016-built VLCC newbuilding. Upon delivery, the Gener8 Apollo entered into the VL8 Pool. As of March 31, 2016, the Company borrowed approximately $59.6 million under the Korean Export Credit Facility to fund the delivery of the Gener8 Apollo. The Company has made all shipyard installment payments, and there is no outstanding payable balance in respect of the Gener8 Apollo.

Gener8 Supreme

On January 6, 2016, Gener8 Supreme LLC, a wholly-owned subsidiary of the Company, took delivery of the Gener8 Supreme, a 2016-built VLCC newbuilding. Upon delivery, the Gener8 Supreme entered into the VL8 Pool. As of March 31, 2016, the Company borrowed approximately $62.6 million under the Sinosure Credit Facility to fund the delivery of the Gener8 Supreme. The Company has made all shipyard installment payments, and there is no outstanding payable balance in respect of the Gener8 Supreme.

Gener8 Ares

On January 22, 2016, Gener8 Ares LLC, a wholly-owned subsidiary of the Company, took delivery of the Gener8 Ares, a 2016-built VLCC newbuilding. Upon delivery, the Gener8 Ares entered into the VL8 Pool. As of March 31, 2016, the Company borrowed approximately $61.1 million under the Korean Export Credit Facility to fund the delivery of the Gener8 Ares. The Company has made all shipyard installment payments, and there is no outstanding payable balance in respect of the Gener8 Ares.

Gener8 Hera

On February 24, 2016, Gener8 Hera LLC, a wholly-owned subsidiary of the Company, took delivery of the Gener8 Hera, a 2016-built VLCC newbuilding. Upon delivery, the Gener8 Hera entered into the VL8 Pool. As of March 31, 2016, the Company borrowed approximately $60.5 million under the Korean Export Credit Facility to fund the delivery of the Gener8 Hera. The Company has made all shipyard installment payments, and there is no outstanding payable balance in respect of the Gener8 Hera.

Gener8 Success

On March 22, 2016, Gener8 Success LLC, a wholly-owned subsidiary of the Company, took delivery of the Gener8 Success, a 2016-built VLCC newbuilding. Upon delivery, the Gener8 Success entered into the VL8 Pool. As of March 31, 2016, the Company borrowed approximately $59.9 million under the Sinosure Credit Facility to fund the delivery of the Gener8 Success. The Company has made all shipyard installment payments and there is no outstanding payable balance in respect of the Gener8 Success.

Gener8 Nautilus

On April 20, 2016, Gener8 Nautilus LLC, a wholly-owned subsidiary of the Company, took delivery of the Gener8 Nautilus, a 2016-built VLCC newbuilding. Upon delivery, the Gener8 Nautilus entered into the VL8 Pool. As of June 30, 2016, the Company borrowed approximately $59.7 million under the Korean Export Credit Facility to fund the delivery of the Gener8 Nautilus. The Company has made all shipyard installment payments and there is no outstanding payable balance in respect of the Gener8 Nautilus.

Gener8 Andriotis

On May 12, 2016, Gener8 Andriotis LLC, a wholly-owned subsidiary of the Company, took delivery of the Gener8 Andriotis, a 2016-built VLCC newbuilding. Upon delivery, the Gener8 Andriotis entered into the VL8 Pool. As of June 30, 2016, the Company borrowed approximately $60.5 million under the Sinosure Credit Facility to fund the delivery of the Gener8 Andriotis. The Company has made all shipyard installment payments and there is no outstanding payable balance in respect of the Gener8 Andriotis.

Gener8 Constantine

On June 27, 2016, Gener8 Constantine LLC, a wholly-owned subsidiary of the Company, took delivery of the Gener8 Constantine, a 2016-built VLCC newbuilding. Upon delivery, the Gener8 Constantine entered into the VL8 Pool. As of June 30, 2016, the Company borrowed approximately $57.4 million under the Korean Export Credit Facility to fund the delivery of the Gener8 Constantine. The Company has made all shipyard installment payments and there is no outstanding payable balance in respect of the Gener8 Constantine.

Gener8 Consul

On December 30, 2015, the Company entered into an agreement to sell the 2004-built Handymax tanker Gener8 Consul for $17.5 million, gross proceeds. As of December 31, 2015, the Gener8 Consul was classified as held for sale. On February 17, 2016, the sale was completed.

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following (dollars in thousands):

Escrow deposit amount represents the loan proceeds due to the Company upon delivery of Gener8 Apollo, which were received upon delivery of the vessel in January 2016. Insurance claims receivable consist substantially of payments made by the Company for repairs of vessels that the Company expects, pursuant to the terms of the insurance agreements, to recover from the carrier within one year, net of deductibles which have been expensed. As of June 30, 2016 and December 31, 2015, the portion of insurance claims receivable not expected to be collected within one year of $0.4 million and $0.8 million, respectively, is included in Other assets (non‑current) on the condensed consolidated balance sheets. Other primarily represents advances to our third‑party technical managers.

6. VESSELS UNDER CONSTRUCTION

Vessels under construction represents the cost of acquiring contracts to build vessels, installments paid to shipyards, certain other payments made to third parties and interest costs incurred during the construction of vessels (until the vessel is substantially complete and ready for its intended use).

Vessels under construction consist of the following (dollars in thousands):

In March 2014, the Company acquired seven newbuilding contracts for VLCC tankers from Scorpio Tankers Inc. (the “2014 Acquired VLCC Newbuildings”) in a stock purchase transaction (“SPV Stock Purchase”).  Additionally,  the Company acquired 14 newbuilding contracts for VLCC tankers from Navig8 Crude in connection with the 2015 merger (the “2015 Acquired VLCC Newbuildings,” and together with the 2014 Acquired VLCC Newbuildings, the “Acquired VLCC Newbuildings”).

During the three months ended June 30, 2016 and in accordance with its newbuilding contract, one of the 2014 Acquired VLCC Newbuildings was delivered to the Company. As of June 30, 2016, one additional 2014 Acquired VLCC Newbuilding is scheduled to be delivered during the remaining period of 2016.

During the three months ended June 30, 2016 and in accordance with their newbuilding contracts, two of the 2015 Acquired VLCC Newbuildings were delivered to the Company. As of June 30, 2016, nine additional 2015 Acquired VLCC Newbuildings are scheduled to be delivered during the remaining period of 2016 and early 2017.

7. OTHER ASSETS

Other assets consist of the following (dollars in thousands):

As of December 31, 2015, escrow deposits primarily represented the final installment payments for Gener8 Apollo. Subsequent to the delivery of Gener8 Apollo in January 2016, the related amount was transferred to vessels.

8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following (dollars in thousands):

Accrued milestones and supervision payments represent the amounts due for construction milestone and supervision installment payments under the contracts for the Acquired VLCC newbuildings. During the six months ended June 30, 2016, the Company paid $86.7 million of milestone and supervision installments that was accrued as of December 31, 2015.

9. LONG‑TERM DEBT

Long‑term debt consists of the following (dollars in thousands):

Unamortized discount and debt financing cost include an unamortized discount related to the Company’s Senior Notes and deferred financing costs comprised of bank fees and legal expenses associated with securing new loan facilities. These deferred financing costs are amortized based upon the effective interest rate method over the life of the related debt, which is included in interest expense.

As of June 30, 2016, the Company has an aggregate amount of up to approximately $643.5 million of available borrowings under the Korean Export Credit Facility and the Amended Sinosure Credit Facility (subject to the terms and conditions) for the purpose of financing future deliveries of VLCC newbuilding vessels with remaining installment payments of $536.7 million, of which $440.9 million and $95.8 million are due in the remaining period of 2016 and 2017, respectively.

On June 29, 2016, the Company amended the Sinosure Credit Facility for purposes of financing future deliveries of two VLCC newbuilding vessels, the Gener8 Chiotis and the Gener8 Miltiades.  

The Sinosure Credit Facility, as amended by the Amending Deed (the “Amended Sinosure Facility”), provides for term loans up to the aggregate amount of approximately $385.2 million (subject to the terms and conditions set forth in the Amended Sinosure Credit Facility). All other terms of the Amended Sinosure Credit Facility remain substantially similar in all material respects to those in the Sinosure Credit Facility prior to giving effect to the Amending Deed. See “Amended Sinosure Credit Facility” below for further information regarding the Amended Sinosure Credit Facility.

On May 2, 2016, the Company entered into interest rate swap transactions, which are intended to be cash flow hedges that effectively fix the interest rates for the Refinancing Facility, the Korean Export Credit Facility and the Sinosure Credit Facility. The interest rate swap transactions were each confirmed under an ISDA Master Agreement, as published by the International Swaps and Derivatives Associations, Inc. (“ISDA”), including the Schedule thereto and related documentation containing customary representations, warranties and covenants. The Company may modify or terminate any of the foregoing interest rate swap transactions in accordance with their terms or enter into additional swap transactions in the future from time to time. Notwithstanding the terms of the interest rate swap transactions, the Company remains ultimately obligated for all amounts due and payable under the credit facilities in accordance with the terms thereof. See Note 10, Financial InstrumentS, for more details.

Refinancing Facility

On September 3, 2015, the Company entered into a term loan facility (the “Refinancing Facility”) to refinance its former senior secured credit facilities. The Refinancing Facility provides for term loans up to the aggregate approximate amount of $581.0 million, which have been fully drawn. The loans under the Refinancing Facility will mature on September 3, 2020. The Refinancing Facility bears interest at a rate per annum based on the London Interbank Offered Rate (“LIBOR”) plus a margin of 3.75% per annum. If there is a failure to pay any amount due on a loan under the Refinancing Facility and related credit documents, interest shall accrue at a rate 2.00% higher than the interest rate that would otherwise have been applied to such amount. See Note 10, FINANCIAL INSTRUMENTS, for the Company’s interest rate risk management program related to the credit facility.

The Company is obligated to repay the Refinancing Facility in 20 consecutive quarterly installments which commenced on September 3, 2015. The Company is also required to prepay the Refinancing Facility upon the occurrence of certain events, such as the sale of a vessel held as collateral or total loss of a vessel.

Korean Export Credit Facility

On September 3, 2015, the Company entered into a term loan facility (the “Korean Export Credit Facility”) to fund a portion of the remaining installment payments due under shipbuilding contracts in respect of 15 of the Acquired VLCC Newbuildings being built at Korean shipyards. As of June 30, 2016, the Korean Export Credit Facility funded the delivery of 7 of these newbuildings.

The Korean Export Credit Facility provides for term loans up to the aggregate approximate amount of $963.7 million, which is comprised of a tranche of term loans to be made available by a syndicate of commercial lenders up to the aggregate approximate amount of $282.0 million (the “Commercial Tranche”), a tranche of term loans to be fully guaranteed by the Export-Import Bank of Korea (“KEXIM”) up to the aggregate approximate amount of $139.7 million (the “KEXIM Guaranteed Tranche”), a tranche of term loans to be made available by KEXIM up to the aggregate approximate amount of $197.4 million (the “KEXIM Funded Tranche”) and a tranche of term loans insured by Korea Trade Insurance Corporation (“K-Sure”) up to the aggregate approximate amount of $344.6 million (the “K-Sure Tranche”).

Borrowings under each term loan will be available to be incurred at or around the time of delivery of each VLCC newbuilding funded by the Korean Export Credit Facility in an amount equal to the lowest of (i) 65% of the final contract price of such VLCC newbuilding, (ii) 65% of the maximum contract price of such VLCC newbuilding and (iii) 60% of the fair market value of such VLCC newbuilding tested at or around the time of delivery of such VLCC newbuilding. The Company’s ability to utilize these funds is subject to the actual delivery of the vessel and other borrowing conditions. Each loan will mature, in respect of the Commercial Tranche, on the date falling 60 months from

the date of borrowing of that loan and, in respect of the other tranches, on the date falling 144 months from the date of borrowing of that loan.

The Korean Export Credit Facility bears interest at a rate per annum based on LIBOR plus a margin of, in relation to the Commercial Tranche, 2.75% per annum, in relation to the KEXIM Guaranteed Tranche, 1.50% per annum, in relation to the KEXIM Funded Tranche, 2.60% per annum and in relation to the K-Sure Tranche, 1.70% per annum. If there is a failure to pay any amount due, interest shall accrue at a rate 2.00% higher than the interest rate that would otherwise have been applied to such amount. See Note 10, FINANCIAL INSTRUMENTS, for the Company’s interest rate risk management program related to the credit facility.

The Company is obligated to repay the Commercial Tranche of each loan in 20 equal consecutive quarterly installments (excluding a final balloon payment equal to 2/3 of the applicable loan) of such loan and is obligated to repay the other tranches of each loan in 48 equal consecutive quarterly installments. The Company is also required to prepay the loans upon the occurrence of certain events, including a default under a shipbuilding contract, a sale or total loss of a vessel, and upon election by the majority lenders, upon a change of control of the Company.

Amended Sinosure Credit Facility

On December 1, 2015, the Company entered into a term loan facility (the “Sinosure Credit Facility”) to fund a portion of the installment payments due under shipbuilding contracts in respect of three VLCC newbuildings which are being built at Chinese shipyards and to refinance a credit facility The Sinosure Credit Facility provided term loans up to the aggregate approximate amount of $259.6 million. On June 29, 2016, the Company amended the Sinosure Credit Facility (the “Amended Sinosure Credit Facility”) to, among other things, include (i) Gener8 Chiotis LLC and Gener8 Miltiades LLC as owner guarantors under the Sinosure Credit Facility and (ii) two additional term loan tranches having an aggregate amount of up to approximately $125.7 million, for purposes of financing deliveries of an additional two VLCC newbuilding vessels, the Gener8 Chiotis and the Gener8 Miltiades.  As of June 30, 2016, the Amended Sinosure Credit Facility funded the delivery of three VLCC newbuildings and refinanced a credit facility. The Amended Sinosure Credit Facility provides for term loans up to the aggregate amount of approximately $385.2 million (subject to the terms and conditions set forth in the Amended Sinosure Credit Facility).

Borrowings under each term loan will be available to be incurred at or around the time of delivery of each newbuilding funded by the Amended Sinosure Credit Facility in an amount equal to the lowest of (i) 67.5% of the contract price of such VLCC newbuilding, (ii) 67.5% of the maximum contract price of such VLCC newbuilding and (iii) 65% of the fair market value of such VLCC newbuilding tested at or around the time of delivery of such VLCC newbuilding. The Company’s ability to utilize these funds is subject to the actual delivery of the vessel and other borrowing conditions. Each loan will mature on the date falling 144 months from the date of borrowing of that loan.

The Amended Sinosure Credit Facility bears interest at a rate per annum based on LIBOR plus a margin of 2.00% per annum. If there is a failure to pay any amount due on a loan, interest shall accrue at a rate 2.00% higher than the interest rate that would otherwise have been applied to such amount. See Note 10, FINANCIAL INSTRUMENTS, for the Company’s interest rate risk management program related to the credit facility.

The Company is obligated to repay each loan under the Amended Sinosure Credit Facility in equal consecutive quarterly installments (excluding a final balloon payment equal to 20% of the applicable loan), each in an amount equal to 1 2/3% of such loan, on each of March 21, June 21, September 21 and December 21 until the loan’s maturity date. On the respective maturity date, the Company is obligated to repay the remaining amount that is outstanding under each loan. The Company is also required to prepay the loans upon the occurrence of certain events, including a default under a shipbuilding contract, a sale or total loss of a vessel and, upon election by The Export-Import Bank of China and one other lender, upon a change of control of the Company.

Senior Notes

On March 28, 2014, the Company and Gener8 Maritime Sub V entered into a Note and Guarantee Agreement (the “Note and Guarantee Agreement”), with affiliates of BlueMountain Capital Management, LLC, in respect of the

Company’s issuance of senior unsecured notes due 2020 (the “Senior Notes”). On May 13, 2014, the Company issued the Senior Notes in the aggregate principal amount of $131.6 million for proceeds of approximately $125 million (before fees and expenses), after giving effect to the original issue discount provided for in the Note and Guarantee Agreement. As of June 30, 2016 and December 31, 2015, the discount on the Senior Notes was $5.3 million and $5.7 million, respectively, which the Company amortizes as additional interest expense until March 28, 2020.

Interest on the Senior Notes accrues at the rate of 11.0% per annum in the form of additional Senior Notes and the balloon repayment is due 2020, except that if the Company at any time irrevocably elects to pay interest in cash for the remainder of the life of the Senior Notes, interest on the Senior Notes will thereafter accrue at the rate of 10.0% per annum.

Interest Expense

Interest expense, net consists of the following (amounts in thousands):

(1) Amounts include interest rate swaps settlements.

Financial Covenants

Under the Refinancing Facility, the Korean Export Credit Facility and the Sinosure Credit Facility, the Company is required to comply with various collateral maintenance and financial covenants, including with respect to its maximum leverage ratio, minimum cash balance and an interest expense coverage ratio covenant. The lenders also require the Company to comply with a number of customary covenants, including covenants related to the delivery of quarterly and annual financial statements, budgets and annual projections; maintaining required insurances; compliance with laws (including environmental); maintenance of flag and class of the collateral vessels; restrictions on consolidations, mergers or sales of assets; limitations on liens; limitations on issuance of certain equity interests; limitations on restricted payments; limitations on transactions with affiliates; and other customary covenants and related provisions. As of June 30, 2016, the Company was in compliance with all such covenants that were in effect on such date.

The Refinancing Facility, the Korean Export Credit Facility and the Amended Sinosure Credit Facility also contain certain restrictions on payments of dividends and prepayments of the indebtedness under the Note and Guarantee Agreement. The Refinancing Facility, the Korean Export Credit Facility and the Amended Sinosure Credit Facility permit the Company to pay dividends and make prepayments under the Note and Guarantee Agreement so long as the Company satisfies certain conditions under these facilities’ minimum cash balance and collateral maintenance tests subject to a limit of 50% of consolidated net income earned by the Company after the date of the respective facility. For purposes of calculating consolidated net income, consolidated net income will be adjusted, without duplication, by adding noncash interest expense and amortization of other fees and expenses; amounts attributable to impairment charges on intangible assets, including amortization of goodwill; non-cash management retention or incentive program payments; non-cash restricted stock compensation; and losses on minority interests or investments less gains on such minority interests or investments. The Company is also permitted to pay dividends in an amount not to exceed net cash

proceeds received from its issuance of equity after the date of the respective facility. It may also make prepayments under the Note and Guarantee Agreement from the proceeds received from sale of assets so long as it satisfies certain conditions under its minimum cash balance and collateral maintenance tests. Further, the Company is allowed to refinance the Note and Guarantee Agreement subject to certain restrictions and repay the outstanding indebtedness under the Note and Guarantee Agreement on the maturity date of the Note and Guarantee Agreement.

10. financial instruments

Interest Rate Risk Management

On May 2, 2016, certain of the Company’s wholly-owned subsidiaries entered into six pay-fixed, receive-variable interest rate swap agreements having amortizing notional amounts to hedge a portion of the London Interbank Offered Rate (“LIBOR”) floating rate interest expense on the Company’s credit facilities as discussed in Note 9, LONG TERM DEBT.  Under each interest rate swap transaction, a subsidiary of the Company makes a fixed payment each period in an amount equal to the fixed interest rate for such transaction multiplied by the relevant notional amount for that monthly period in exchange for a payment from the respective swap counterparty in an amount equal to a variable interest rate based on the applicable LIBOR rate for that period multiplied by the same notional amount.  The applicable period, LIBOR rate and notional amounts are identified in the table below. Two of the swaps effectively fix the interest rate on approximately 50% of the aggregate variable interest rate borrowings expected to be outstanding under the Refinancing Facility through September 3, 2020, and three of the swaps effectively fix the interest rate on approximately 80% of the aggregate variable interest rate borrowings expected to be outstanding under the Korean Export Credit Facility through September 30, 2020, and thereafter on approximately 5% of those variable interest rate borrowings through February 20, 2029. The remaining swap effectively fixes the interest rate on approximately 100% of the aggregate variable interest rate borrowings expected to be outstanding under the Sinosure Credit Facility through March 21, 2022, and thereafter on approximately 5% of those variable interest rate borrowings through May 6, 2028. When a swap automatically terminates, the Company may elect to replace the swap to hedge the remaining borrowings outstanding under the applicable credit facility as of the swap termination date. Under certain limited circumstances, the relevant subsidiary of the Company has the right to transfer the related interest rate swap(s) to a qualifying third party, which would have the effect of terminating the subsidiary’s obligations under those interest rate swaps and/or to cause the novation of the related interest rate swap(s) to a third party derivatives dealer.

The Company’s objective is to limit the variability of cash flows associated with changes in LIBOR interest rate payments due on its credit facilities by using the interest rate swaps to offset the future variable rate interest payments made by the Company. The Company elected to apply hedge accounting and designated the swaps as cash flow hedges. The Company uses regression analysis to test if the swaps are expected to be highly effective (defined as the swaps’ offsetting at least 80% and not more than 125% of the hedged interest payments) on both a prospective and retrospective basis. The effective portion of the changes in fair value of the swap agreements, including adjustments for non-performance risk, that are designated and that qualify as cash flow hedges are classified in accumulated other comprehensive loss. These amounts are reclassified to interest expense when the hedged interest payments are incurred.  Amounts in accumulated other comprehensive loss expected to be reclassified into interest expense in the next 12 months are $6.9 million. The ineffective portion, if any, of the change in fair value of the Company’s interest rate swap agreements is required to be recognized in earnings. During the three months ended June 30, 2016, the Company’s interest rate swap agreements were highly effective; hedge ineffectiveness of $1.6 million was recognized in earnings.

At June 30, 2016, the Company was a party to the following interest rate swaps, which are intended to be cash flow hedges that effectively fix the interest rates for the Refinancing Facility, the Korean Export Credit Facility and the Sinosure Credit Facility (dollars in thousands):