Overseas Shipholding focused on maintenance of financial flexibility

By Jennifer Lanning Drey

Savannah, Ga., March 24 - Overseas Shipholding Group Inc. is focused on preserving financial flexibility and balance sheet strength but will continue to consider opportunistic acquisitions, Morten Arntzen, the company's chief executive officer, said during a Thursday presentation at the JPMorgan Aviation, Transportation and Defense Conference in New York.

Overseas Shipholding had $1.3 billion of liquidity at year-end.

In addition to potentially deploying capital for acquisitions, Overseas Shipholding will look to invest in long-term contract-based deals, Arntzen said.

During the question-and-answer portion of the call, Arntzen noted that Overseas Shipholding is currently a bit more leveraged than it would like due in part to an aggressive new building program. However, the company's credit statistics are expected to return to historical norms over time, he said.

Arntzen also said Overseas Shipholding will continue to look to borrow on an unsecured basis, which it believes will offer more flexibility than secured debt. The CEO added that the company is working on an application for Title XI financing under which it would issue long-term bonds.

The application process is expected to take about a year-and-a-half. If issued today, the rate would be slightly below 5%, he said.

Also during the presentation, Arntzen highlighted the company's cushion under its financial covenants. Although it has no intention to do either, Overseas Shipholding could add another $2 billion of debt before breaching its leverage covenant and add an incremental $1.3 billion of losses before it would hit the minimum net worth covenant, he said.

"We will continue to run OSG conservatively," he said.

Overseas Shipholding is a New York-based provider of energy transportation services.

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