Overseas Shipholding see negotiations falter; sale hearing postponed

By Jim Witters

Wilmington, Del., April 10 - Overseas Shipholding Group, Inc. has seen negotiations falter for the sale of several vessels, and the company has postponed indefinitely its scheduled April 25 sale hearing, attorney Luke A. Barefoot said during an April 10 hearing in the U.S. Bankruptcy Court for the District of Delaware.

The foreign bidders do not understand the benefits of a sale under the U.S. bankruptcy code, Barefoot told the court.

At the March 21 bidding deadline, a potential buyer emerged for three of Overseas Shipholding's smaller vessels. The price was acceptable, but the ensuing negotiations failed to produce terms acceptable to both parties, Barefoot said.

The bidder was unable to close on financing, he said.

For the company's large vessels - the Overseas Equatorial, Overseas Sovereign and Overseas Maremar - there has been "significant interest," but the debtors have been unable to come to terms with anyone, he said.

The company is continuing to negotiate with bidders, but Barefoot said the April 25 sale hearing should be adjourned indefinitely.

"If we reach terms with a buyer, we will notify the court and schedule a hearing at the appropriate time," he said.

BP settlement

Also during the hearing, the court approved a stipulated agreement between Overseas Shipholding and BP Oil Shipping Co. USA, Inc. that resolves a dispute over participation in a joint venture.

As previously reported, the two companies reached an interim agreement in February under which BP agreed not to pursue actions to terminate debtor OSG America Operating Co. LLC's membership in a three-way partnership or seek to block OSG's participation in the joint venture.

According to Overseas Shipholding, BP violated the automatic stay of legal proceedings embedded in the bankruptcy code when BP notified debtor OSG on Feb. 22 that it was divesting OSG's membership in Alaska Tanker Co. LLC.

BP asserted the action is permitted under a provision in the LLC agreement.

Since 1999, OSG or its affiliate OSG Ship Management, Inc. has been involved in the partnership with BP and Keystone Alaska, LLC.

David Neier, representing BP, told the court in February that any proposed sale of OSG's membership in the joint venture would be cause for terminating the stipulation agreement.

Teresa Currier, representing Keystone, said her client does not believe the dispute affects the LLC agreement among the partners.

Under the LLC agreement, the sharing ratios in Alaska Tanker are: OSG, 37.5%; Keystone, 37.5%; and BP, 25%.

The stipulated agreement approved April 10 provides that:

• OSG retains its membership interest in Alaska Tanker;

• BP will not interfere with OSG's membership interest in Alaska Tanker; and

• BP will not prevent, limit or impede OSG's ability to participate in member committee meetings held by Alaska Tanker and will not dissolve Alaska Tanker or OSG's interests in the venture.

OSG and BP both reserve their respective rights regarding any disposition of OSG's interest in Alaska Tanker, which can only be accomplished through an order from the bankruptcy court.

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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