Shares of Overseas Shipholding Group Inc (OSG.N), the world's No. 2 independent tanker operator by fleet size, hit an all-time low on Wednesday over fears that talks with its lenders had hit a road block.
The company in August said it needs to plug a $100 million gap in its $1.5 billion fully-drawn revolving credit facility, which will expire in four months. Analysts, however, say the gap could be as much as $300 million.
Overseas Shipholding disclosed in a filing in August that it was in discussions with its main banks, which include DnB NOR Bank (DNB.OL), Swedbank AB (SWEDa.ST), Citibank NA (C.N), HSBC Bank Plc (HSBA.L) and Credit Agricole Corporate and Investment Bank (CAGR.PA).
The company's shares, which plunged 27 percent on Tuesday, have lost 75 percent of their value in the last 12 months. The stock, which traded for more than $50 just two years ago, fell further to a life-low of $3.26 on Wednesday.
"We continue to expect shares of Overseas Shipholding to remain highly volatile given the uncertainty around what shape a potential restructuring could take," Wells Fargo analyst Michael Webber said in a note to clients.
Weber linked Tuesday's plunge on heavy trading volume to a Debtwire report that the company had hired Proskauer as restructuring counsel, fueling the uncertainty.
Overseas Shipholding and Proskauer did not immediately respond to calls seeking comment.
Overseas Shipholding has reported 13 straight quarterly losses, hit by an oversupply of vessels that have pushed down daily rates for transporting crude and refined petroleum products.
Rates for large tankers have fallen about 40 percent in the last month to a low of $5,500 per day on key routes.
Webber said he expected the company to eventually secure the required financing, and another analyst also played up the likelihood.
"Nobody said the negotiations would be easy, but they have enough cash to get by until February so even if there's a stalemate today, it doesn't mean an agreement couldn't come in the next couple of months," Evercore Partners analyst Jonathan Chappell said.
Overseas Shipholding, valued at $116.2 million as of Tuesday's close, had estimated debt obligations of $2.24 billion as of June 30. It had cash reserves of over $550 million.
Adding to the pressure, the shipper faces tighter lending covenants in the fourth quarter, Thomson Reuters LPC, a Reuters loans news service, has reported.
Overseas Shipholding said in August it had fully drawn down its $1.5 billion revolving loan, which is due to expire next February with a smaller $900 million replacement waiting in the wings.
Over 25 percent of the company is controlled by the prominent, Israeli-based Recanati family and privately owned Continental Grain.
The company has said it plans to raise funds by selling some of its 112 ships but this could be hampered by the age of its fleet. Analysts say it is unlikely that the company will find buyers for its ships, the oldest of which is nearly 25 years.
Weak rates and high bunker fuel costs have forced the restructuring of many shipping firms across the globe, from Norway-listed Frontline (FRO.OL) and Italy's Deiulemar Shipping to Indonesia's Berlian Laju Tanker (BLTA.JK) and Sanko Steamship in Japan.
(Reporting by Swetha Gopinath and Divya Lad in Bangalore; Editing by Rodney Joyce, Supriya Kurane)