Overseas Shipholding Owes $463 Million Taxes; Bonds Drop

Overseas Shipholding Group Inc., the largest U.S. tanker operator, owes $463 million in U.S. taxes and interest, the Internal Revenue Service said. The bankrupt company’s bonds plunged.

The company owes $27.9 million in interest on $435.1 million of taxes, the IRS said in papers filed Feb. 11 with Kurtzman Carson Consultants LLC, the agent processing claims for Overseas. The IRS labeled it an unsecured priority claim, meaning that the agency wants it paid ahead of other unsecured and lower-ranking debts.

“The bonds could be worth zero or very little if that claim were sustained,” Oliver Corlett, an analyst at RW Pressprich & Co. in New York, said by phone.

Overseas, based in New York, filed for bankruptcy last year after global shipping rates fell and the company gave up trying to win a federal loan guarantee. Overseas listed assets of $4.15 billion and debt of $2.67 billion in its Chapter 11 petition in U.S. Bankruptcy Court in Wilmington, Delaware.

The company’s 8.125 percent senior unsecured bonds due in March 2018 fell as much as 8.9 cents to 30 cents on the dollar in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The price was the lowest since the securities traded at 23 cents on Nov. 14.

Daniel H. Golden, an attorney for Overseas, and Chuck Burgess, a company spokesman, didn’t immediately return calls seeking comment on the claim.

Federal Rules

Grant Williams, a spokesman for the IRS, declined to comment, citing federal rules prohibiting the agency from publicly talking about individual taxpayers.

In bankruptcy, companies have the right to challenge claims filed by creditors. In the Overseas case, should the IRS prevail, the claim would outrank the claims of bondholders, Corlett said.

“That’s the worst-case scenario,” Ken Luskin, President of Intrinsic Value Asset Management Inc. in Santa Monica, California, said of the size of the IRS claim. “You are going to put in the largest claim you can consider.”

The claim will help investors value Overseas securities by making the company’s liabilities more certain, Luskin said.

CEO Replaced

Overseas announced Feb. 11 that it replaced Morten Arntzen, who had been chief executive officer for nine years. Robert Johnston, head of the company’s U.S.-flag business, took over as CEO, the company said in a statement.

Last year, Overseas withdrew an application for a $241.8 million loan guarantee to help pay for two tankers built at U.S. shipyards after Bloomberg News reported that the company’s ships were calling at Iran’s largest oil terminal and U.S. House Majority Leader Eric Cantor asked the Transportation Department to reject the application.

After that, the company was shut out of credit markets, partly because it said in an Oct. 22 regulatory report that investors couldn’t rely on its financial statements for the past three years, Overseas said in court papers.

The case is In re Overseas Shipholding Group Inc., 12-bk-20000, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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