Overseas Shipholding may file for bankruptcy

Mon Oct 22, 2012 12:04pm EDT

(Reuters) - Debt-laden Overseas Shipholding Group Inc OSG.N, the world's No. 2 independent tanker operator by fleet size, said it was evaluating options including filing for bankruptcy protection and may have to restate results for at least three years.

Shares of the company, which had estimated debt obligations of $2.24 billion as of June 30, fell as much as 66 percent to a life low of $1.02 on Monday morning.

The stock lost more than a third of its value last week on speculation that talks with lenders had stalled.

Shares of Nordic American Tanker Ltd (NAT.N), Teekay Tankers Ltd (TNK.N), DHT Holdings Inc (DHT.N) and Top Ships Inc (TOPS.O) were down between 3 percent and 8 percent.

Financial statements for at least the three years ended December 2011 should no longer be relied on, Overseas Shipholding said in a regulatory filing on Monday.

Overseas Shipholding said it was reviewing a tax issue arising from the fact that while the company is domiciled in the United States, it has substantial international operations.

Allen Andreas, a director and member of the audit committee, resigned on September 27 over disagreements with the board in reviewing the tax issue, the company said in a filing.

The New York-based company had yet to determine if it would need to restate its results for the years in question.

Global Hunter Securities suspended coverage on Overseas Shipholding on Monday, saying it could no longer rely on the company's financial statements, and noting that there was no clarity on the specifics of the tax issue.

DEEP DEBT

Overseas Shipholding said it was reviewing how the tax issue would affect the interpretation of certain provisions in the company's loan agreements.

The company, which had a market value of about $100 million as of Friday's close, said in August it needed to plug a $100 million shortfall in its $1.5 billion fully-drawn revolving credit facility, which would expire in four months.

Analysts, however, said the gap could be as much as $300 million.

Overseas Shipholding has hired Chilmark Partners and Proskauer Rose as financial and legal advisers to help with its potential Chapter 11 filing, according to Thomson Reuters LPC, a Reuters loans news service.

Weak rates and high bunker fuel costs have forced many shipping companies to restructure, including Norway-listed Frontline (FRO.OL), Italy's Deiulemar Shipping, Indonesia's Berlian Laju Tanker (BLTA.JK) and Sanko Steamship in Japan.

"I do not think the banks want to see them file for bankruptcy. I am sure they are using this as a negotiating leverage," said a former shareholder, who did not wish to be named. He cashed out of Overseas Shipholding last month.

However, Deutsche Bank analyst Justin Yagerman said that given the company's statements, a potential filing may be a real possibility rather than a negotiation tactic.

"Overseas Shipholding's mention of a Chapter 11 filing, especially this far before its loan expiry in February 2013, signals negotiations with its lender group have not progressed positively," he wrote in a note.

The company had cash reserves of over $550 million as of June 30.

Its unsecured bonds due 2018 and 2024 were trading around 31 cents on Monday morning, down 10 points from Friday, according to Thomson Reuters LPC.

(Reporting by Swetha Gopinath and Divya Lad in Bangalore; Editing by Supriya Kurane)

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