U.S. Shipping gets $225 million acquisition offer from Rand Logistics

By Caroline Salls

Pittsburgh, July 30 - U.S. Shipping General Partner LLC's board of directors has received a $225 million non-binding proposal from Rand Logistics, Inc. under which Rand would purchase U.S. Shipping's assets as an alternative to its proposed plan of reorganization, according to an 8-K filed by Rand Thursday with the Securities and Exchange Commission.

According to a letter sent by Rand to U.S. Shipping's board, Rand has offered to acquire substantially all of U.S. Shipping's assets for a combination of $160 million in cash, $60 million in 10% six-year senior notes and warrants to purchase 750,000 shares of Rand common stock at an exercise price of $8.00 per share.

The warrants would expire in August 2013.

New York-based Rand said it plans to issue $30 million of common equity to finance a portion of its cash payment, according to the 8-K.

Alternatively, Rand said it would be prepared to issue this common stock directly to creditors in lieu of all or a portion of the cash and note consideration, and it has confirmations from senior creditors who would take at least one-third of the common equity required in lieu of the cash and note consideration.

By electing to receive common equity, Rand said U.S. Shipping's creditors would be able to participate in the potential equity upside of a less leveraged, more diverse publicly-traded Jones Act and Canadian Marine Act company.

In comparison, Rand said U.S. Shipping's plan offers equity in a holding company of the reorganized company that would be "a narrowly-focused, illiquid, privately held company whose fleet size will be reduced by 40% over the next four years and whose growth prospects will be severely limited due to its overleveraged balance sheet."

In addition, Rand said its proposal would allow U.S. Shipping to keep assets with significant value, including $23.8 million of cash on hand; U.S. Shipping's ITB New York, ITB Baltimore, ITB Philadelphia, ITB Mobile and Sea Venture vessels, which would be placed in a new entity with 100% of the equity issued to U.S. Shipping's creditors; and bare boat charter contracts between the new entity and Rand, which would allow Rand to charter and manage each of the vessels

During the charter period, Rand said it would actively market the retained vessels, which have been valued at between $10.5 million and $13 million, for sale on behalf of the new entity.

Rand said reorganized U.S. Shipping will have $135 million in outstanding debt, as well as access to a $20 million revolving credit facility to be provided by Rand's existing lender.

U.S. Shipping is an Edison, N.J.-based provider of long-haul marine transportation services. It filed for bankruptcy on April 30 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 09-12711.

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