Overseas Shipholding will deal with notes; paid off $175 million debt

By Devika Patel

Knoxville, Tenn., March 7 – Overseas Shipholding Group, Inc. plans to refinance or pay off its 2018 notes by year end in order to keep its revolver.

In 2016, the company made voluntary and mandatory prepayments on a term loan and reduced debt further by buying back $27 million principal amount of debt at a discount and repurchasing $38 million of bonds.

“During 2016, we made optional and mandatory prepayments of $110 million in principal on a term loan and opportunistically repurchased and retired an additional $27 million in principal at a discount price of $23.6 million,” chief financial officer and senior vice president Christopher W. Wolf said on the company’s fourth quarter earnings conference call on Tuesday.

“On our bonds, we executed repurchases of $38 million, bringing our total deleveraging activities in 2016 to $175 million,” Wolf said.

“The bonds [that] are due in March of 2018 – we have a unique feature in our revolver that if we want to keep our revolver going, we have to deal with the bonds by the end of the year, Dec. 29,” president, director and chief executive officer Samuel H. Norton said on the call.

“Obviously that’s something we’re going to have to deal with this year, either through prepaying it or looking at refinancing of that and possibly other debt instruments as well,” Norton said.

“In the fourth quarter, we accelerated the payment of $19 million in principal amount of our bank debt.

“We strengthened the capital structure of the company throughout 2016, ending the year at 1.9x net debt to EBITDA versus nearly 3x a year ago,” Norton said.

Total cash was $206.9 million as of Dec. 31, 2016. The company began 2016 with total cash of $205 million, which included $11 million of restricted cash.

Total debt at year-end was $525 million, consisting of $444 million of the term loan and $81 million of bonds. The company also has a $75 million revolver, which is undrawn as of March 7.

With $254 million of equity, the company’s net debt to equity ratio is 1.3x.

Combining the undrawn revolver with unrestricted cash, Overseas Shipholding had $282 million of liquidity at year-end.

Fourth quarter and full year 2016 Adjusted EBITDA was $49.9 million and $176.2 million, up 6% and 5%, respectively, from $47.2 million and $168.1 million in the same periods in 2015.

Adjusted EBITDA was $49.9 million for the quarter, an increase of $2.7 million compared with the fourth quarter of 2015.

Adjusted EBITDA was $176.2 million for the full year 2016, an increase of $8.1 million compared with the full year 2015.

Loan

On Sept. 20, 2016, Overseas Shipholding amended the credit agreement for its secured term loan and revolving credit facility and OSG International, Inc. was required to prepay $75 million of the term loan in connection with the amendment.

The amendment

• Permits OSG International to pay a dividend of up to $100 million to Overseas Shipholding prior to Oct. 14;

• Reduces the amount of incremental term loans and incremental revolving loans that may be obtained under the credit agreement to $200 million and alters some conditions for providing such incremental loans; and

• Increases the amount of certain investments OSG International and its subsidiaries may make.

Jefferies Finance LLC was the administrative agent.

Overseas Shipholding is a New York-based tanker company.

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