In order to cure this deficiency, the Company must submit a plan to Nasdaq to regain compliance by June 17, 2013. If the plan is accepted by Nasdaq, the Company may be granted a grace period to regain compliance of up to 180 days, expiring on or before October 28, 2013.
The Company is currently preparing a comprehensive plan that will be submitted to Nasdaq in order to regain compliance with the continued listing standards of the Capital Market.
Agreement for the Sale of Subsidiaries in Satisfaction of UOB Loan
On May 6, 2013, Seanergy's subsidiary, MCS, entered into an agreement with its fourth lender (United Overseas Bank) for the sale of three vessel owning subsidiaries that own the Handysize vessels African Joy, African Glory and Asian Grace, in exchange for a nominal cash consideration and full satisfaction of the underlying loan. The sale is subject to final documentation and is expected to close within the second quarter of 2013 or any other date as may be agreed between the Company and the lender. Upon the closing of the transaction approximately $38 million of the Company's outstanding debt will be discharged and the guarantee provided by MCS will be fully released.
Prior to the sale of the shares, the Company's Board of Directors will obtain a fairness opinion from an independent third party.
Ability to Continue as a Going Concern
Over the past year and as of the date of this press release, the Company has experienced significant losses and reduction in cash which has affected its ability to satisfy its obligations due to shipping sector volatility and economic difficulties. The Company experienced significant reduction in cash flow, as it had to re-charter its vessels at low prevailing rates.
As a result of the above, the Company defaulted under its loan agreements in respect of certain covenants (including, in some cases, the failure to make principal and interest payments, the failure to satisfy financial covenants and the triggering of cross default provisions). To date, the Company has not obtained waivers of all these defaults from its lenders. Since January 1, 2012, the Company has sold or otherwise disposed a total of 13 vessels (or the ownership of certain of its vessel owning subsidiaries) and it has entered into an agreement to sell three additional vessel owning subsidiaries in connection with its debt restructuring. Proceeds from the sale of remaining vessels are expected to be insufficient to fully repay the related debt and, therefore, it is likely that the Company will continue to have significant debt unless it enters into satisfactory arrangements with its lenders for the discharge of all such obligations. During the restructuring process, the lenders have continued to reserve their rights in respect of events of default under the loan agreements. The lenders have not exercised their remedies at this time, including demand for immediate payment. The lenders, however, could change their position at any time. As such, there can be no assurance that a satisfactory final agreement will be reached with the lenders in the restructuring, or at all.
While the Company continues to use its best efforts to restructure the debt of its remaining lender, there can be no assurance that the negotiations will be successful or that it will obtain waivers or amendments from its lender. Failure to obtain such waivers or amendments could materially and adversely affect the Company's business and operations. Furthermore, the impact of the final terms of any restructuring is uncertain. Due to the above, the Company's $176.9 million outstanding debt as of March 31, 2013 is classified as current.
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