U.S. Shipping gets enhanced offer from Rand; plan value disputed

By Caroline Salls

Pittsburgh, Aug. 6 - Rand Logistics, Inc. said U.S. Shipping Partners LP's valuation and recovery analysis will unveil a plan of reorganization value that is "so highly speculative as to be illusory," according to a letter sent by Rand chairman and chief executive officer Laurence S. Levy in response to U.S. Shipping's rejection of Rand's alternative proposal.

Levy said Rand does not agree with U.S. Shipping's contention that its own plan will deliver a higher value to stakeholders than Rand's offer.

As a result of the rejection, Levy said Rand has enhanced its proposal to address issued raised by U.S. Shipping's creditors.

Under the enhanced proposal, Rand said it is willing to acquire U.S. Shipping's retained ITB New York, ITB Baltimore, ITB Philadelphia, ITB Mobile and Sea Venture vessels for an additional $10 million in cash.

Under the original proposal, Rand offered to charter the vessels and market them for sale, with proceeds to be distributed to U.S. Shipping creditors.

In addition, Rand said the subsidiary created to acquire U.S. Shipping's assets will issue $25 million of six-year second-lien term loans with a 10% cash interest rate to the U.S. Shipping creditors in order to enhance the credit quality of the debt to be issued by Rand.

As a result, Levy said the senior notes to be issued by Rand under its proposal will be reduced to $35 million in principal amount.

Rand proposal

Under Rand's proposal, U.S. Shipping's first-lien creditors would receive $193.5 million in cash, $25 million in new second-lien term loans, $30 million in 10% six-year senior notes and 750,000 warrants due August 2013 for Rand common stock with an exercise price of $8.00 per share.

Second-lien secured creditors would receive $5 million principal amount of new Rand notes, and unsecured creditors would receive $250,000 in cash.

Rand said it estimates that U.S. Shipping's first-lien creditors would recover 71% under the Rand proposal, compared to 61% under the U.S. Shipping plan; second-lien secured creditors would recover 5% under the Rand offer as opposed to 0% under the plan; and unsecured creditors would recover 3% under the Rand proposal, compared to 1.7% under the plan.

In addition, Rand said its proposal will deliver a higher percentage of the recovery in cash, substantially limiting the risk to creditors.

Levy said Rand is prepared to move forward with its proposal immediately.

However, if U.S. Shipping won't meet with it, Levy said Rand reserved the right to use any available means to "bring to the attention of the creditors and the court the inadequacies and infeasibility of the existing plan," as well as U.S. Shipping's failure to explore alternatives.

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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