U.S. Shipping exploring strategic alternatives, lacks resources to repay debt if accelerated

By Caroline Salls

Pittsburgh, Nov. 14 - U.S. Shipping Partners LP said it has retained Greenhill & Co., LLC and Jefferies & Co., Inc. to help the company explore its strategic alternatives, including a possible business or equity sale, as well as to find other ways to increase liquidity and strengthen financial resources, according to a 10-Q filed with the Securities and Exchange Commission.

In light of its liquidity pressures, the company said it did not pay a distribution on its subordinated units and general partner units due for the fourth quarter of 2007 and first quarter of 2008, and it did not pay a distribution on any of its units due for the second and third quarters of 2008.

An October amendment to the company's senior credit facility prohibits it from paying any distributions on any of the units until the credit facility borrowings.

U.S. Shipping said it would not have the financial resources to immediately repay all of the outstanding borrowings under its various debt agreements if potential defaults prompted lenders to accelerate the debt.

The company said its cash flows and liquidity have come under increasing pressure because of difficult market conditions.

As a result, U.S. Shipping said it is not in compliance with financial covenants relating to leverage and fixed-charge and interest coverage under its senior credit facility.

Although the senior lenders have waived the non-compliances through Jan. 31, the company said it will be in default on the credit facility after that date if it cannot secure additional waivers or an amendment.

U.S. Shipping said the credit facility currently requires it to have a specified minimum cumulative EBITDA on the last day of October, November, December and January, and there can be no assurance that it will meet this requirement.

If all of its debt is accelerated, the company said it would need to either amend the credit facility or replace it, "which, give current market conditions, would be difficult."

In addition, the company said its ability to pay interest on its senior notes will depend on the availability under its revolving credit agreement, cash generated from operations and other working capital requirements.

U.S. Shipping is an Edison, N.J.-based provider of long-haul marine transportation services, principally for refined petroleum products, petrochemical and commodity chemical products.

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