Overseas Shipholding to tender for remaining units of OSG America

By Lisa Kerner

Charlotte, N.C., July 30 - Overseas Shipholding Group, Inc. said it plans to begin an $8-per-unit cash tender offer for all of the outstanding publicly held common units of OSG America LP in late August.

The offer price is a premium of approximately 12.7% to the closing price of the units on Wednesday and a premium of approximately 11.1% above the average closing price of the units for the preceding 90 trading days, said Overseas Shipholding. OSG America closed at $7.10 (NYSE: OSP) on Wednesday.

According to Overseas Shipholding, the tender offer is conditioned upon the tender of more than 4,003,166 common units, which is a majority of the units of OSG America not owned by Overseas Shipholding and its affiliates.

Overseas Shipholding and its affiliates own about 77.1% of the outstanding equity of OSG America consisting of 53.3% of the outstanding common units, 100% of the outstanding subordinated units and a 2% general partner interest, the company said.

Once the offer is completed, Overseas Shipholding will acquire any remaining units not tendered through the exercise of a repurchase right contained in OSG America's partnership agreement.

Morten Arntzen, president and chief executive officer of Overseas Shipholding, said "recent adverse changes in the outlook for the Jones Act market have created significant near- and medium-term challenges for OSG America's business."

As a result, OSG America's distributable cash flow generated in the second half of 2009 through 2010 is expected to be below what is needed to fund the company's minimum quarterly distribution.

"Furthermore, vessel cancellations, delivery delays and tighter credit and equity market conditions have diminished OSG America's fleet growth and expansion opportunities, which were central to the investment story at its initial public offering," Arntzen said in a news release.

The tender offer, according to Arntzen, is "an attractive opportunity" for OSG America unitholders to "realize the value of their units at a significant premium to the recent unit price."

Overseas Shipholding is a New York-based tanker company.

Tampa, Fla.-based OSG America operates U.S. flag product carriers and barges for transporting refined petroleum products.

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