Overseas Shipholding Asks Lenders to Relax Merger-Limiting Rules

Overseas Shipholding Group Inc., the oil transporter that exited bankruptcy in August, is asking lenders to remove rules that hinder its ability to consolidate with other companies and to ease requirements that it re-invest asset-sale proceeds, according to a regulatory filing.

The shipper is requesting that investors holding more than $1.2 billion in debt strike provisions in loan agreements that “limit the company’s ability to ‘agree to’ any mergers, consolidations or acquisitions,” OSG said Wednesday in the filing, which contained a copy of a presentation that had earlier been sent to lenders. It also wants the creditors to agree that the appointment of new directors via proxies wouldn’t be classified as a change of control.

The changes, taken together with some additional amendments, would “clarify and clean up” the loan agreement rules and “provide flexibility for the company to pursue a number of contemplated initiatives,” the company said in the presentation.

The company filed a prospectus earlier this month that would allow stockholders including John Paulson’s Paulson & Co., Cyrus Capital Partners and BlueMountain Capital Management to cash out through a public offering, according to a May 4 filing. OSG’s Chapter 11 plan allowed pre-bankruptcy stockholders to keep some ownership while financing its exit in part with a $1.5 billion equity rights offering.

Eased Terms

The New York-based company would sell Class A shares if it pursued the initial public offering the prospectus lays out. Its Class B shares, which already trade on the New York Stock Exchange, have climbed 33 percent this month to $4.50.

OSG is asking holders of the larger of its two loans, which pertains to its international assets, to waive requirements that it use most of the proceeds from an asset sale for reinvestment in the company, according to the presentation. It also wants them to agree to make collateral from assets connected to its pooled shipping vessels available for new lenders and allow the international unit to pay a dividend to the parent.

Lenders of the loan for the international assets would receive a 50 basis-point fee if they agreed to amend their credit agreement, the presentation shows. Lenders of the smaller loan for U.S. domestic assets would get 5 basis points. Both sets of lenders must decide whether they will accept the changes by June 1.

OSG’s $300 million of 8.125 percent unsecured notes due March 2018 last traded at 105.5 cents on the dollar to yield 5.98 percent on May 26, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

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