* Concerns about financial restatement cut off credit access
* Third-biggest US bankruptcy this year by assets - tracker
* Company says has cash to continue operating as usual
By Swetha Gopinath and Tom Hals
Nov 14 Debt-laden Overseas Shipholding Group Inc
, the world's No. 2 independent tanker operator by fleet
size, filed for bankruptcy protection on Wednesday as questions
about its financial statements shut it out of credit markets.
The company has also suffered as the United States and other
industrialized economies shift toward domestic oil supplies and
away from imports, sending rates for transporting crude oil
Many shipping companies have been forced to restructure,
including Norway-listed Frontline, Italy's Deiulemar
Shipping, Indonesia's Berlian Laju Tanker and Sanko
Steamship in Japan.
"The tanker market has been absolutely miserable for the
last eight months," Overseas Holding Chief Executive Morten
Arntzen told Reuters.
He said the company was bigger than other shippers that had
restructured, the bankruptcy could be more complex and the board
would consider legitimate offers for its businesses. "We do have
some attractive assets."
Overseas Shipholding said it had enough cash to continue
operating as usual and did not require debtor-in-possession
However, the company's disclosure last month that it might
have to re-state results for at least three years "severely
limited any access to the capital and credit markets," according
to documents filed with Delaware's Bankruptcy Court.
Overseas Shipholding said in October it had uncovered a tax
reporting problem stemming from the fact that it is domiciled in
the United States but has substantial international operations.
Allen Andreas, a director and member of the audit committee,
resigned in September over the issue.
The company made the tax disclosure as it was negotiating
with lenders over a $1.5 billion credit facility which matures
in February. Arntzen said he did not have a time frame for
resolving the tax problem, which was being investigated by an
The company has reported a loss for 13 straight quarters. It
listed total assets of $4.15 billion and liabilities of $2.67
billion as of June 30.
It is the third-biggest U.S. bankruptcy this year by assets,
behind Residential Capital LLC, with assets of $15.68 billion,
and Eastman Kodak Co, with $6.24 billion, according to
LEASES AT RISK
The company, which employs 3,600, said in a court filing it
determined it needed a fundamental overhaul of its finances and
operations to recapitalize the business.
Overseas Shipholding has been struggling to plug a looming
cash shortfall of up to $600 million. Its $1.5 billion revolving
credit facility matures in February and the company had arranged
a replacement credit facility, but it only provides $900
The operator of about 112 vessels is likely to use the
breathing space of bankruptcy to end uneconomical vessel leases,
its main fixed cost, according to an attorney with experience in
"The $64,000 question is how does your fleet compare to the
competition in terms of efficiency and how does it compare to
your needs?" said Ken Rosen of Lowenstein Sandler.
Wells Fargo Securities shipping analyst Michael Webber said
above-market leases with ship owner Capital Product Partners LP
could be at risk.
About 35 percent of Overseas Shipholding's fleet is leased
from companies including Wilbur Ross-backed Diamond S Shipping
and DHT Holdings Inc. Oslo-based American Shipping Co
ASA has leased 10 tankers to Overseas Shipholding and
said it did not expect charter cancellations.
These companies have already written down the value of their
contracts with the company, or have begun to look for new
customers for their vessels.
Shares of Frontline Ltd, the world's largest independent oil
tanker operator, shot up 17 percent on news of Overseas
Shipholding's bankruptcy filing.
"People probably think that OSG's bankruptcy will remove
capacity from the market, thus helping surviving players like
Frontline," said Evercore Partners analyst Jonathan Chappell.
However, Chappell said that even if Overseas Shipholding cut
the number of ships it operated, the vessels would likely be
remain in service with another operator.
The case is In re: Overseas Shipholding Group Inc, U.S.
Bankruptcy Court, District of Delaware, No:12-20000