Overseas Shipholding amends equity agreement to raise rights offering

By Kali Hays

New York, May 22 - Overseas Shipholding Group Inc. entered into an amended equity commitment agreement, increasing the amount to be raised through a rights offering to $1,505,000,000 from $1.5 billion pursuant to the issuance of additional subscription rights, according to an 8-K filed Wednesday with the Securities and Exchange Commission.

The equity commitment agreement as amended is subject to approval by the bankruptcy court at a hearing scheduled for May 23.

The rights offering will be backstopped by each commitment party or its designee on a several but not joint basis.

As previously reported, the company terminated its initial plan support and equity commitment agreements with some of the lenders under its $1.5 billion credit agreement on May 2 after receiving a "more favorable" proposal for an alternative plan of reorganization from holders of existing equity interests.

The company said it decided that the equityholders' proposal is better for creditors and interest holders than the lender plan and filed the amended plan of reorganization reflecting the equityholders' proposal.

The equity commitment agreement includes two separate classes of new common stock and penny warrants to purchase the new class A shares and class B shares under subscription rights to be distributed to holders of outstanding equity.

Under the amended plan, the subscription rights are expected to go to existing equityholders of record as of 5 p.m. ET on June 2.

From and after the record date, Overseas will halt all trading of the existing shares and intends to seek the removal of its trading symbol from the over-the-counter "pink sheet" market. From and following the record date, the company will disregard any transfers of existing shares, and the subscription rights will not be transferrable.

The company said each subscription right will entitle a holder that is an accredited investor or qualified institutional buyer and that votes in favor of the plan to purchase 11.5 class A shares or class A warrants for $3 per security.

All holders that are not participating eligible holders, including any eligible holder that decides not to participate in the rights offering, will receive one new class B share or class B warrant in exchange for their subscription right.

Overseas said holders of the class B shares and class B warrants will also have the future right to receive a share of up to 10% of the net recoveries of the company's claims asserted against Proskauer Rose LLP and some of its members.

The class B shares and the class B warrants are convertible, at the holder's option at any time, into class A shares and class A warrants, respectively, and will automatically convert on the 10th business day after the entry of a final order related to the litigation and the distribution of any net litigation recovery.

According to the 8-K, each commitment party agreed to exercise its subscription rights in full, to backstop a portion of any remaining securities related to unexercised rights following completion of the offering and to purchase a portion of an additional number of class A shares and/or class A warrants offered to the commitment party.

Overseas Shipholding, a New York-based tanker company, filed for bankruptcy on Nov. 14, 2012. The Chapter 11 case number is 12-20000.

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