February 17, 2012 / 11:00 PM / 6 years ago

UPDATE 2-Overseas Shipholding withdraws loan application

By Divya Lad

Feb 17 (Reuters) - Overseas Shipholding Group, the world's second-largest independent tanker operator, said it withdrew a $241.8 million loan guarantee application with the U.S. Maritime Administration, after the federal agency indicated it could not be approved.

The company had filed the application in February 2010 under Title XI Federal Ship Financing Program, which guarantees fixed-rate long-term loans from the private sector.

"Both the company and investors were counting on it to come through to help with the liquidity situation...it is a surprise and it is rather disappointing," Evercore Partners analyst Jonathan Chappell said.

Chappell said the company could dispose some assets if they really need to.

The withdrawal of the application will not affect the company's financial position and it remains in compliance with its financial covenants, Overseas said.

The company had sought the loan for two shuttle tankers, which were delivered in 2010 and 2011, and are on time charters expiring in 2015.

"It is not unusual for Title 11 loan guarantee applications to be withdrawn during the review process," representative of Maritime administration Meghan Keck said via an email.

Overseas, incorporated in 1969, has a long-term debt of $2.07 billion and cash and short-term investments of $182.1 million as of Sept. 30, according to Thomson Reuters data.

Last week, Overseas suspended its dividend to "preserve liquidity and maintain financial flexibility."

Overseas Shipholding shares were trading down 3 percent on Friday after market close on the New York Stock Exchange.

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