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TEXT - S&P cuts Overseas Shipholding Group rating to 'D'
November 14, 2012 / 8:48 PM / 5 years ago

TEXT - S&P cuts Overseas Shipholding Group rating to 'D'

Overview
     -- U.S.-based global energy transporter Overseas Shipholding Group Inc. 
today filed voluntary Chapter 11 petitions for itself and certain operating 
subsidiaries.
     -- We are lowering our ratings on the company, including our long-term 
corporate credit rating to 'D' from 'CCC-', based on the bankruptcy filing, 
and removing the ratings from CreditWatch, where we placed them with negative 
implications on Oct. 22, 2012.
     -- We are lowering our issue rating on the senior unsecured debt to 'D' 
from 'CCC-'.
     -- The '3' recovery rating, indicating our expectation that lenders will 
receive a meaningful (50%-70%) recovery in a payment default scenario, remains 
unchanged for now. However, the company has disclosed a potential tax 
liability that we estimate could lower the recovery to a 10% to 30% range.

Rating Action
On Nov. 14, 2012, Standard & Poor's Ratings Services lowered its long-term 
corporate credit rating on Overseas Shipholding Group Inc. (OSG) to 'D' from 
'CCC-'. We also lowered our ratings on the company's senior unsecured debt to 
'D' from 'CCC-'. The '3' recovery rating remains unchanged, indicating our 
expectation that lenders will receive a meaningful (50%-70%) recovery in a 
payment default scenario. All ratings were removed from CreditWatch, where 
they were placed with negative implications on Oct. 22, 2012.


Rationale
The downgrade reflects the fact that OSG announced today that it had filed 
chapter 11 bankruptcy protection.

We are keeping our '3' recovery ratings unchanged for now. However, our 
recovery ratings do not take into account any potential tax liabilities that 
the company may have. As of June 30, 2012, the company had unrecognized 
deferred U.S. income tax of approximately $770 million because of 
undistributed earnings from shipping income of its foreign subsidiaries or its 
less-than-50%-owned foreign shipping joint ventures. The recovery could fall 
into the 10% to 30% range (corresponding with a '5' rating) if actual tax 
liability is consistent with the amount of unrecognized deferred U.S. income 
tax and if that liability is treated as a priority claim. 

On Oct. 22, 2012, OSG filed an 8-K stating it is reviewing a tax issue arising 
from the fact that the company is domiciled in the United States and has 
substantial international operations, and relating to the interpretation of 
certain provisions contained in the company's loan agreements. As a result of 
that continuing process, OSG stated its previously issued financial statements 
for the three years ended Dec. 31, 2011, and associated interim periods for 
the quarters ended March 31 and June 30, 2012, should no longer be relied 
upon. 

New York City-based OSG is one of the world's leading liquid bulk shipping 
companies. As of June 30, 2012, the company operated a fleet of 112 vessels 
(67 owned, 45 chartered-in), totaling about 10.7 million deadweight tons. 

Recovery analysis
The issue-level rating on OSG's senior unsecured debt is 'D', the same as the 
corporate credit rating. The recovery rating is '3', indicating our 
expectation a meaningful (50%-70%) recovery in a payment default scenario.

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