U.S. Shipping Partners confident in liquidity, ability to comply with financial covenants in 2008

By Jennifer Lanning Drey

Portland, Ore., Feb. 11 - U.S. Shipping Partners LP's chief executive officer, Paul Gridley, said he is confident the company will have sufficient liquidity in 2008 to remain in compliance with the financial covenants under its credit facilities and to continue to pay its minimum $0.45 quarterly distribution on common units.

The company has taken steps to support its liquidity in light of uncertain economic and market conditions faced by the company and the shipping industry, Gridley said during a conference call held Monday to discuss the company's fourth-quarter earnings results.

The CEO also reiterated a previous announcement that United States Shipping Master LLC, the holder of U.S. Shipping Partners' subordinated units and general partner units, has requested that the company not pay the fourth-quarter distribution on the subordinated units and general partner units and instead retain the cash for working capital purposes, including strengthening coverage with respect to its financial covenants under its credit facility.

During the call, U.S. Shipping Partners' chief financial officer, Albert Bergeron, reported that the company had total debt of $460 million at year-end. Of that amount, $41 million pertains to a joint venture and is non recourse.

The company's distributable cash flow for 2007 was $42.0 million, or 1.39 times the $30.2 million needed to cover the company's cash distributions for the year, Bergeron highlighted during the call.

U.S. Shipping Partners also reported Monday that it has secured from Manitowoc Marine Group an extension of its option to cancel the contract for construction of the fifth barge in the company's articulated tug barge newbuild series. Additionally, the company has negotiated an amendment of its contract with Eastern Shipbuilding Group, Inc. to extend the option to construct the fifth tug of the series until June 30.

For the fourth quarter, U.S. Shipping reported EBITDA of $14.7 million, compared with EBITDA of $11.7 million for the comparable period in 2006.

U.S. Shipping Partners' integrated tug barge fleet is currently its largest source of voyage revenue and EBITDA; however, operating income and EBITDA provided by the fleet is expected to be negatively impacted over the next several years. Factors expected to negatively affect the performance include the expiration of a support agreement that assured minimum charter rates, the fact that more of the integrated tug barges are expected to operate in the spot market rather than under long-term charters, increased volatility in rates in the spot market, and higher operating expenses due to the age of the integrated tug barges and new union contracts.

U.S. Shipping is an Edison, N.J.-based provider of long-haul marine transportation services, principally for refined petroleum products.

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