Overseas Shipholding eyes long-term financing to provide liquidity

By Lisa Kerner

Charlotte, N.C., Aug. 1 - Overseas Shipholding Group Inc. had more than $550 million, including cash on hand, on its balance sheet at the end of the second quarter, president and chief executive officer Morten Arntzen said during an earnings call on Wednesday.

A majority of the funds are being held in administrative accounts that invest in short-term U.S. Treasury securities and similar instruments, said Arntzen.

In addition, Overseas Shipholding is working with its banks to secure long-term financing to provide liquidity and help the company manage through the extended downturn in international flag tanker markets, he said.

The company is also considering other alternatives to improve liquidity. Arntzen said he would not discuss liquidity specifics or banking relationships on Wednesday's call.

Subsequent to the end of the quarter, Overseas Shipholding borrowed $343 million, the full remaining availability under its $1.5 billion revolving credit facility, in July. The funds are being held in money market instruments.

Overseas Shipholding expects to remain in compliance with all of its financial covenants and cover any refinancing shortfall over the next 12 months through the use of cash on hand and the execution of one or more of the liquidity-raising options, a company news release said.

Financial highlights

At the end of the second quarter, Overseas Shipholding had $2.24 billion of total debt, up from $2.07 billion at year's end and unchanged from the prior quarter.

At $2.02 billion, net debt was essentially unchanged compared to the same periods.

Overseas Shipholding ended the second quarter with $227 million of cash and cash equivalents, up $55 million from year's end due in part to the February $150 million drawdown from the revolver and the $49 million prepayment in January of a secured debt facility.

Liquidity-adjusted long-term debt to capital was 53.9%, down from 56.2% as of Dec. 31, 2011, due in part to the reclassification of $256 million of long-term revolver balances and the $900 million capacity of the replacement forward start facility.

As of June 30, 15 vessels constituting 29% of the net book value of Overseas Shipholding's vessels were pledged as collateral under secured debt facilities, the company said.

Cash flow from operations was $10.1 million for the second quarter and $19.6 million for the six months ended June 30.

The loss for the second quarter was $55.3 million, or $1.83 per diluted share, compared with a loss of $37.3 million, or $1.24 per diluted share, in the second quarter of 2011.

Overseas Shipholding is a New York-based tanker company.

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