U.S. Shipping skips loan payments, secures forbearance that requires restructuring talks

By Caroline Salls

Pittsburgh, Jan. 5 - U.S. Shipping Partners LP did not pay the principal or interest payment due Dec. 31 on its senior credit agreement, triggering an event of default, but the company was able to secure a forbearance agreement from the holders of a majority-in-interest of the outstanding loans, according to an 8-K filed Monday with the Securities and Exchange Commission.

Under the forbearance agreement, the loan interest holders agreed not to take any payment default-related actions until 5 p.m. ET on Feb. 10 provided no other payment default occurs before then.

During the forbearance period, U.S. Shipping has agreed to negotiate with the administrative agent and lenders on a possible restructuring and strategic alternatives, including a possible sale of the partnership.

Failure to hold these good faith negotiations will result in an additional credit agreement default.

In addition, the company said the lenders' previous waiver of any potential financial covenant defaults will expire Jan. 31 and prompt an event of default and termination of the forbearance agreement if U.S. Shipping cannot obtain a waiver or another forbearance agreement.

At Dec. 31, there was a total of $332.6 million outstanding under the senior credit agreement.

Also, the company said its failure to make the Dec. 31 payments constitutes an event of default on the partnership's interest rate swap agreement.

As a result, the counterparty to each interest rate swap agreement can elect to terminate the agreement early.

If the interest rate swap agreement with the administrative agent is terminated early, the partnership said it estimates it would owe $14.9 million under that agreement, and, if its interest rate swap agreement with Lehman Brothers Special Financing Inc. is terminated early, the partnership would owe $9.9 million under that agreement.

The company said the counterparties would not be able to instruct the administrative agent to foreclose on the partnership's assets during the term of the forbearance agreement.

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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