Overseas Shipholding Group files bankruptcy to reduce debt profile

By Caroline Salls

Pittsburgh, Nov. 14 - Overseas Shipholding Group, Inc. (OSG) filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the District of Delaware.

According to a news release, the company intends to use the Chapter 11 process to significantly reduce its debt profile, reorganize other financial obligations and create a strong financial foundation for the future.

OSG said it would work with its constituencies to emerge from bankruptcy as quickly as possible while maintaining its market position, business model and strategy.

The company said it has more than adequate cash to allow it to continue operating as usual and does not require debtor-in-possession financing.

In addition, OSG said it expects to generate significant cash flow while in Chapter 11, further ensuring its ability to maintain safe, reliable and high-quality operations throughout the process.

Some subsidiaries, including those that manage OSG's facilities in Manila, Singapore, Greece, London and Newcastle, have not filed for Chapter 11 reorganization.

"The last few years have been difficult for everyone in our industry, but OSG has continued to provide safe, incident-free and reliable shipping services for our global client base," president and chief executive officer Morten Arntzen said in the release.

"Our Jones Act fleet, in particular, has performed very well the last 18 months and has secured a number of notable contract extensions. Over the past two weeks, OSG has continued to fix vessels with our clients.

"We will use the Chapter 11 process to definitively resolve our financial issues.

"An orderly restructuring in Chapter 11 will provide stability both to OSG and to the entire shipping industry. We expect to emerge from our Chapter 11 reorganization with a solid financial base and clear path to future success."

First-day motions

OSG has filed first-day motions that ask the court to approve payment of employee wages and benefits that were incurred before the petition was filed, payment of specified pre-filing amounts owed to vendors and suppliers and continued access to the company's cash collateral and cash management systems.

The company said it is working closely with its vendors to secure their continued support.

Tax issue

OSG said it informed investors on Oct. 22 that it is in the process of reviewing a tax issue arising from the fact that the company is based in the United States and has substantial international operations. The company said the issue also relates to the interpretation of provisions contained in the company's loan agreements.

As a result of this issue, the company informed investors that its financial statements for at least the previous three years should not be relied upon.

Debt details

According to court documents, Overseas Shipholding had $4,151,334,000 in assets and $2,674,281,000 in debt at June 30.

The company's largest unsecured creditors are:

• DNB Nor Bank of Houston, with a $1,491,644,436 revolving letter-of-credit claim;

• Indenture trustee Bank of New York Mellon of New York, with a $302.98 million claim related to the company's 8 1/8% debentures due 2018 and a $66.12 million claim for the 8¾% debentures due 2013;

• Indenture trustee Wilmington Trust Co. of Wilmington, Del., with a $148.71 million claim related to the company's 7½% senior notes due 2024; and

• Retirement Plan of Maritrans, Inc. of Westwood, Mass., with a $15.84 million pension plan claim.

During the bankruptcy process, Greylock Partners LLC CEO John Ray will serve as OSG's chief reorganization officer. OSG is being advised by legal counsel Cleary Gottlieb Steen & Hamilton LLP and financial adviser Chilmark Partners LLC.

Overseas Shipholding is a New York-based tanker company. The Chapter 11 case number is 12-20000.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.