In the months leading up to Monday’s Chapter 11 warning analysts, investors and bondholders were focused on how the troubled tanker owner would plug a potential liquidity gap when it replaced a fully drawn $1.5bn revolver with a $900m forward-start facility in February.
Today, many believe the chances of clinching the crucial credit line have evaporated altogether as a result of financial uncertainty even if the Manhattan-based shipowner manages to stave of bankruptcy and shore up its balance sheet without the oversight of a federal judge.
“Even if OSG doesn’t file Chapter 11 I don’t believe it will be able to meet the restrictive covenant requirements by the 31 December deadline to which the forward-start will be subject,” Lambros Papaeconomou of NYFEX Asset Management told TradeWinds in an interview.
If the company were to enter bankruptcy the equity analyst doesn’t believe it could borrow a tip from General Maritime Corp’s (Genmar) playbook and line up an injection from an angel investor as the plan would probably be met by heavy opposition from existing debt holders.
“Most of the debt is unsecured and these guys won’t agree to OSG taking on more debt, at least not more debt that is senior to their claims,” he explained. “More importantly, OSG’s covenants lack the provisions that allowed Genmar to get private equity financing from Oaktree [Capital].”
Bondholder have been actively courting legal counsel in case the company pursues a court restructuring amid fears that CEO Morten Arntzen and its board of directors are in the process of negotiating the terms of a pre-packaged plan that would favour senior lenders.
Yesterday, hundreds tuned into a conference call in which a variety of scenarios were addressed by CRT Capital debt analysts and lawyers from Bracewell & Giuliani, which is handling Omega Navigation’s bankruptcy and was involved in the liquidation of Marco Polo Seatrade.
When asked about rumours suggested talks between OSG and lenders have stalled, Bob Burns said: “A lot of these banks are in triage mode and are focusing on who is the most critical patient at the moment...I have seen banks go from zero to 60 as quick as a Porsche when they really need to.”
It’s difficult to determine how many counterparties have a vested interest in the financial stability of OSG but shares of spin-off DHT Holdings have taken a hit and American Shipping Co, which has Jones Act tonnage on bareboat charter to the troubled company, has seen its stock suffer too.
In the first quarter of this year Oslo-listed AMSC, formerly known as Aker American Shipping, said the principal risk factors it expected to face in 2012 were related to the operational and financial performance of OSG, which controls all ten of its products carriers.
You can read more about the OSG and the CRT conference call by exploring our archive or by clicking on the links located to the right of this article
