Overseas Shipholding wins OK for sale process, exclusivity extension

By Jim Witters

Wilmington, Del., March 5 - Overseas Shipholding Group, Inc. won approval for a vessel sale process for the rights, titles and interests in the Overseas Equatorial, Overseas Sovereign and Overseas Maremar vessels during a March 5 hearing in the U.S. Bankruptcy Court for the District of Delaware.

The company also was granted an extension of its exclusive periods for filing a Chapter 11 plan and for soliciting plan acceptances.

Overseas Shipholding "anticipates substantial progress" during the coming months in "right-sizing" the company's fleet and devising a business plan, debtors attorney James L. Bromley told the court.

The company also is working to resolve a $453 million claim filed by the Internal Revenue Service, he said.

Since the bankruptcy filing, the company "has stabilized around the world," Bromley said.

The U.S. fleet is "very profitable," but concerns remain "on the international side," he said.

Sale procedures

The sale procedures approved during the hearing include:

• Bids are due by March 21;

• A proposed successful bidder will be named by April 9. That bidder will have 48 hours to obtain board approval of the purchase and provide proof of financing;

• The company will file a notice of successful bid with the court by April 11;

• A sale hearing will be conducted on April 25.

Should any or none of the vessels fail to draw bids the company deems acceptable, Overseas can elect to reject the bids and abandon the sale process.

Committee concerns

Fred S. Hodara, representing the official committee of unsecured creditors, said the committee did not object to the process for selling the three vessels, but it is concerned that the company is unwilling to work with the committee on establishing a confidential minimum bid.

The committee also believes the company can draw higher bids by waiting until the market is stronger.

Since the sale process was designed to emulate vessel sales outside of bankruptcy, there is no provision for a stalking-horse bidder.

The committee sought to use the Norwegian Shipbrokers Association Memorandum of Agreement - a "Kelly's Bluebook" for the shipping industry - to establish a reserve price for the three vessels, Hodara said.

The debtor rejected the idea outright, saying that it would infringe on its right to exercise its business judgment.

Hodara also said industry projections indicate a stronger market in 2014 for vessels such as the three being offered, and he suggested the company wait in the hopes of drawing higher bids.

Overseas Shipholding has more than $507 million in cash and would not be risking depletion of cash reserves by delaying the sale.

Luke A. Barefoot, representing Overseas, said the "market test" that the sale provides would either result in acceptable bids for the three ships or not. He called the committee's concerns "premature."

Market projections for individual vessels that reach further than one year are unreliable, Barefoot said.

The company is well within its right of reasonable business judgment in deciding not to deplete its reserves by continuing to operate the three vessels, he said.

Exclusivity extension

The company received approval to extend its exclusive filing period for filing a Chapter 11 plan through Aug. 2 from March 14.

The exclusive period for soliciting plan votes was extended through Oct. 1, 2013 from May 13.

Overseas said it needs the extra time to allow it to continue to develop a Chapter 11 plan in consultation with its creditors.

Overseas Shipholding, a New York-based tanker company, filed for bankruptcy on Nov. 14. The Chapter 11 case number is 12-20000.

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