10. LONG‑TERM DEBT

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


	September 30,		December 31,
	2017		2016
Refinancing Facility	$	273,081	$	408,337
Korean Export Credit Facility		627,893		658,568
Senior Notes		189,164		174,604
Sinosure Credit Facility		322,758		340,442
Total		1,412,896		1,581,951
Less: current portion of long-term debt		(138,297)		(181,023)
Less: unamortized discount and debt financing costs		(52,356)		(63,146)
Long-term debt less unamortized discount and debt financing costs	$	1,222,243	$	1,337,782

Unamortized discount and debt financing costs include an unamortized discount related to the Company’s Senior Notes and deferred financing costs comprised of insurance, 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, net in the condensed consolidated statements of operations.

On April 10, 2017, the Company modified the interest rate swaps agreements, initially entered into on May 2, 2016. During the second quarter of 2017 and in connection with the modifications, the Company received payments totaling $18.2 million from the swap counterparties. See Note 11, Financial InstrumentS, for more details.

During the three months ended September 30, 2017 and in connection with the sale of five vessels (Gener8 Phoenix, Gener8 Horn, Gener8 Elektra, Gener8 Noble and Gener8 Theseus), the Company repaid $23.5 million and $100.5 million, of borrowings under the Refinancing Facility and the Korean Export Credit Facility, respectively. During the nine months ended September 30, 2017 and in connection with the sale of eight vessels (the Gener8 Phoenix, Gener8 Horn, Gener8 Elektra, Gener8 Noble, Gener8 Theseus, Gener8 Ulysses, Gener8 Orion and Gener8 Daphne), the Company repaid $62.7 million and $100.5 million, of borrowings under the Refinancing Facility and the Korean Export Credit Facility, respectively.

As of September 30, 2017 and 2016, the weighted average interest rate for the credit facilities are 4.21% and 4.14%, respectively.

Refinancing Facility

On September 3, 2015, the Company entered into a term loan facility (the “Refinancing Facility”), by and among the Company’s wholly-owned subsidiary, Gener8 Maritime Subsidiary II Inc. (“Gener8 Maritime Sub II”), the Company, as parent, the lenders party thereto, and Nordea Bank Finland, PLC, New York Branch as Facility Agent and Collateral Agent in order to refinance the $508M Credit Facility and the $273M Credit Facility. The Refinancing Facility provided for term loans up to the aggregate approximate amount of $581.0 million, which were fully drawn on September 8, 2015. 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 accrues at a rate 2.00% higher than the interest rate that would otherwise have been applied to such amount.

The Refinancing Facility is secured on a first lien basis by a pledge of the Company’s interest in Gener8 Maritime Sub II, a pledge by Gener8 Maritime Sub II of its interests in the 18 vessel-owning subsidiaries it owns (the “Gener8 Maritime Sub II Vessel Owning Subsidiaries”) and a pledge by such Gener8 Maritime Sub II Vessel Owning Subsidiaries of substantially all their assets, and is guaranteed by the Company and the Gener8 Maritime Sub II Vessel Owning Subsidiaries. In addition, the Refinancing Facility is secured by a pledge of certain of the Company’s and Gener8 Maritime Sub II Vessel Owning Subsidiaries’ respective bank accounts. As of September 30, 2017, the Gener8 Maritime Sub II Vessel Owning Subsidiaries owned four VLCCs, seven Suezmax vessels, two Aframax vessels and two Panamax vessels.

Gener8 Maritime Sub II is obligated to repay the Refinancing Facility in 20 consecutive quarterly installments, which commenced on September 3, 2015. Gener8 Maritime Sub II 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.

See Note 11, FINANCIAL INSTRUMENTS, for the Company’s interest rate risk management program related to the credit facility.

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 for 15 VLCC newbuildings owned by the Company at that time. The borrower under the Korean Export Credit Facility is Gener8 Maritime Subsidiary VIII Inc. (“Gener8 Maritime Sub VIII”), the Company’s wholly owned subsidiary, and the Korean Export Credit Facility is guaranteed by the Company and vessel-owning subsidiaries owned by Gener8 Maritime Sub VIII. 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 up to $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”).

During the nine months ended September 30, 2017, the Company borrowed approximately $100.1 million under the Korean Export Credit Facility to fund the deliveries of Gener8 Hector and Gener8 Ethos and paid down $100.5 million related to the sale Gener8 Noble and Gener8 Theseus. As of September 30, 2017, the Company has an aggregate amount of up to approximately $63.0 million of available borrowings under the Korean Export Credit Facility (subject to borrowing limits and other conditions set forth in the applicable senior secured credit facilities) for the purpose of financing one future delivery of VLCC newbuilding vessel with remaining installment payments of $48.2 million.

On September 26, 2017, On September 26, 2017, Gener8 Maritime Subsidiary Inc. (formerly known as Navig8 Crude Tankers Inc.), which became our subsidiary as a result of the 2015 merger, entered into (i) an amendment agreement (the “Amendment Agreement”) with HHIC-Phil Inc. (the “Builder”) related to the shipbuilding contract dated March 25, 2014 between Gener8 Maritime Subsidiary Inc. and the Builder (the “Building Contract”) in relation to the construction of the Gener8 Nestor (the “Vessel”) and (ii) an outstanding works agreement (the “Outstanding Works Agreement”) with the Builder. The Amendment Agreement and the Outstanding Works Agreement provide that the Builder is obligated to physically deliver the Vessel on October 9, 2017 and, notwithstanding delivery, complete any outstanding works relating to the Vessel required to meet the specifications and requirements of the Building Contract. The Amendment Agreement further provides for a $19.3 million reduction in the contract price payable under the Building Contract for the Vessel, including $5.4 million in liquidated damages due to the Company under the Building Contract relating to the late delivery of the Vessel by the Builder based on the delivery schedule set forth in the Building Contract. As a result, the contract price for the Vessel has, in effect, been reduced from $96.4 million to $77.1 million, and the final installment due from the Company upon delivery of the Vessel by the Builder on October 9, 2017 was reduced from $48.2 million to $29.0 million. See Note 17, Subsequent Events, for additional information regarding the delivery of Gener8 Nestor, and the related borrowings under the Korean Export Credit Facility.

Each Korean Vessel Loan will mature, in respect of the Commercial Tranche, on the date falling 60 months from the date of borrowing of that Korean Vessel Loan and, in respect of the other tranches, on the date falling 144 months from the date of borrowing of that Korean Vessel Loan. KEXIM and K-Sure have the option of requiring prepayment of their respective tranches if the Commercial Tranche is not, upon its termination date, fully refinanced or renewed by the commercial lenders. Upon exercise of such option, all outstanding amounts under the relevant tranche must be repaid on the final repayment date in respect of the Commercial Tranche. Repayment dates are each date that a repayment installment is required to be made, on March 31, June 30, September 30, and December 31 of the applicable year.

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.

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 on a Korean Vessel Loan, interest accrues at a rate 2.00% higher than the interest rate that would otherwise have been applied to such amount. See Note 11, FINANCIAL INSTRUMENTS, for the Company’s interest rate risk management program related to the Korean Export Credit Facility. The Korean Export Credit Facility is secured on a first lien basis by a pledge of various assets, including, as of September 30, 2017, 12 VLCC vessels.

On March 24, 2017, the Company amended the Korean Export Credit Facility to change the dates on which amortization payments are due to the 15th day of each of April, July, October and January.

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 borrower under the Sinosure Credit Facility is Gener8 Maritime Subsidiary VII Inc. (“Gener8 Maritime Sub VII”), the Company’s wholly owned subsidiary, and the Sinosure Credit Facility is guaranteed by the Company and vessel-owning subsidiaries owned by Gener8 Maritime Sub VII. 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 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 September 30, 2017, the Sinosure Credit Facility funded the delivery of five VLCC newbuildings and refinanced a credit facility. The Sinosure Credit Facility provided for term loans up to the aggregate amount of approximately $385.2 million. Each loan under the Sinosure Credit Facility is referred to herein as a “Sinosure Vessel Loan.” Each Sinosure Vessel Loan will mature on the date falling 144 months from the date of borrowing of that Sinosure Vessel Loan.

The 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 Sinosure Vessel Loan, interest accrues at a rate 2.00% higher than the interest rate that would otherwise have been applied to such amount. See Note 11, FINANCIAL INSTRUMENTS, for the Company’s interest rate risk management program related to the Sinosure Credit Facility. The Sinosure Credit Facility is secured on a first lien basis by a pledge of various assets, including, as of September 30, 2017, six VLCC vessels.

The Company is obligated to repay each Sinosure Vessel Loan 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 Sinosure Vessel Loan. The Company is also required to prepay the Sinosure Vessel 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 September 30, 2017 and December 31, 2016, the discount on the Senior Notes was $4.1 million and $4.9 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, net

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Refinancing Facility (1)	$	(3,760)	$	(5,355)	$	(12,298)	$	(16,680)
Korean Export Credit Facility (1)		(7,041)		(3,802)		(20,289)		(7,984)
Senior Notes		(5,326)		(4,744)		(15,361)		(13,729)
Sinosure Credit Facility (1)		(3,210)		(2,309)		(8,868)		(4,688)
Amortization of deferred financing costs and other		(5,597)		(2,945)		(11,920)		(8,081)
Capitalized interest		912		6,680		3,163		24,290
Commitment fees		(174)		(1,235)		(624)		(4,547)
Interest rate swaps		1,286		—		2,360		—
Interest income		368		11		797		64
Interest expense, net	$	(22,542)	$	(13,699)	$	(63,040)	$	(31,355)

(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); compliance with ERISA: 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 September 30, 2017, 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 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 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.

Under the Note and Guarantee Agreement, the Company is permitted to make dividend payments if, after giving effect to the dividends, the ratio of the Company’s secured indebtedness minus its cash to the Company’s aggregate fair market value of all of its vessels is less than 60%, and the Company satisfies certain conditions under the Note and Guarantee Agreement’s cumulative consolidated net income and net cash proceeds tests. In addition, in order to make dividend payments under the Note and Guarantee Agreement, the Company must have irrevocably elected to pay interest on the Senior Notes in cash rather than additional Senior Notes.

Guarantees

The Company may issue debt securities in the future. All or substantially all of the subsidiaries of the Company may be guarantors of such debt. Any such guarantees are expected to be full, unconditional and joint and several. Each of the Company’s subsidiaries is 100% owned by the Company. In addition, the Company has no independent assets or operations outside of its ownership of the subsidiaries and any such subsidiaries of the Company other than the subsidiary guarantors are expected to be minor. Other than restrictions contained under applicable provisions of the corporate, limited liability company and similar laws of the jurisdictions of formation of the subsidiaries of the Company, no restrictions exist on the ability of the subsidiaries to transfer funds to the Company through dividends, distributions or otherwise.