Overseas Shipholding statement approved; plan hearing set for July 18

By Caroline Salls

Pittsburgh, May 28 - Overseas Shipholding Group, Inc. received court approval of its amended disclosure statement and equity commitment agreement, according to an 8-K filed Wednesday with the Securities and Exchange Commission.

The plan of reorganization confirmation hearing is scheduled for July 18.

The disclosure statement order also set June 6 as the record date for voting on the plan and for the distribution of subscription rights, set a 5 p.m. ET on July 7 deadline for voting on the plan and for the exercise of subscription rights and set a July 11 deadline for filing plan confirmation objections.

Under the disclosure statement order, Overseas will suspend trading of its common stock and beneficial interests in that stock in the over-the-counter market at 5 p.m. ET on June 3 to ensure that all trades in those securities will be able to settle no later than the June 6 voting record date.

Plan amendment

As part of amendments filed to the company's plan earlier this week, each holder of 7½% notes due 2024 will have its notes reinstated and will receive a cash payment equal to the amount of unpaid and overdue interest, unless that holder elects to receive a distribution of new notes and cash instead.

Each holder that elects to receive the alternate distribution will receive notes with a principal amount equal to that of the 2024 notes currently owned, plus a cash payment equal to 1% of the principal amount of the notes held and a cash payment equal to the amount of interest that would be due on the notes if they were reinstated.

The new notes will be due Feb. 15, 2021.

Creditor treatment

Specific terms of the amended plan include the following:

• All administrative claims, priority tax claims, other priority claims, secured vessel debtor-in-possession claims, secured vessel claims, other secured claims, credit agreement claims and "other unsecured" claims will be unimpaired;

• Overseas Shipholding will retain its Cexim vessels and DSF vessels and pay Cexim and DSF claims in full;

• Holders of the company's 8¾% debentures will be paid in full in cash, including any applicable contractual interest;

• The company's 8 1/8% notes will be reinstated, including payment of any applicable contractual interest;

• The company's 7½% notes will be reinstated, including payment of any applicable contractual interest, or exchanged for new notes and cash;

• The reorganized debtors will enter into exit financing consisting of $1.2 billion in term loans and $150 million in revolving loan facilities;

• Admiralty lien claims and personal injury claims, including numerous asbestos claims, that have not otherwise been disallowed and expunged will be unimpaired and may be asserted against the applicable reorganized debtors, subject to those debtors' rights and defenses;

• A $1.51 billion rights offering will be made to all OSG equity interestholders;

• Holders of subordinated debt claims and subordinated equity claims will receive a share of the proceeds of any residual director and officer insurance and, to the extent the claims exceed that share, cash equal to the amount of the claim;

• Holders of old OSG equity interests will receive subscription rights for new class A securities. Those who do not participate in the offering or are not eligible to receive rights will receive new class B securities and up to 10% of the net proceeds from any professional liability action;

• Intercompany claims are unimpaired and will be reinstated or discharged and satisfied at the option of the debtors; and

• Intercompany equity interests are unimpaired and will be reinstated.

Equity commitment approved

The company said it entered into a second amendment to the equity commitment agreement on Monday that increases the amount to be raised through a rights offering to $1.51 billion from $1,505,000,000 under the issuance of additional subscription rights.

In addition, the second amendment joined additional parties to the agreement, including holders of Overseas' 7½% senior notes due 2024.

Those parties are now obligated to support and vote in favor of the amended plan and have withdrawn their previously filed objections.

The agreement is backstopped by each commitment party.

As previously reported, 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 12 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.

Exit financing

According to the 8-K, Overseas also received court approval of commitment documents from Jefferies Finance LLC under which Jefferies agreed to provide exit financing to support the plan.

The proposed financing would consist of a $600 million term loan secured by a first lien on substantially all the debtors' U.S. Flag assets and a second lien on specified assets, a $600 million term loan secured by a first lien on substantially all the debtors' International Flag assets, a $75 million asset-based revolving loan facility secured by a first lien on some U.S. Flag assets and a second lien on substantially all the debtors' U.S. Flag assets and a $75 million revolving loan facility secured by a first lien on substantially all the debtors' International Flag assets.

The company said the full terms of the exit financing are still subject to bankruptcy court approval.

Overseas Shipholding, a New York-based tanker company, filed for bankruptcy on Nov. 14, 2012 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 12-20000.

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