Overseas Shipholding Group late Friday filed its amended reorganization plan providing for a backstopped $1.5 billion rights offering to current shareholders.
As reported, the company said in a court filing Friday that the rights offering “substantially increases recoveries for the debtors’ existing equityholders” over the company’s prior plan, under which equityholders were to receive new equity in the reorganized company valued at $61.4 million.
The proceeds of the rights offering are to be used to fund a cash payment to holders of the company’s $1.5 billion of senior credit agreement debt.
According to the revised reorganization plan, each current share of Overseas Shipholding stock would receive a subscription right to purchase 11.5 class A securities at $3 per security.
The rights offering is backstopped by 10 current equityholders, namely, Alden Global Capital, BHR Capital, BlueMountain Capital, Brownstone Investment Group, Caxton International, Cerberus, Cyrus Capital, Luxor Capital, Paulson & Co., and Silver Point Capital. The commitment among the backstop parties is several, not joint liability, in the amount of each commitment parties’ proportionate share, according to court documents. Those shares were not disclosed in the court documents.
The backstop fee is 5% of the aggregate amount raised in the offering.
Equityholders that do not participate in the rights offering would be entitled to receive one share of a new class B security in the reorganized company for each current share of Overseas Shipholding held. All of the terms of the class B securities were not set forth in the disclosure statement, which was filed without certain exhibits, but the filing did say that holders of class B securities would receive 10% of the proceeds, if any, of the company’s lawsuit against its former counsel Proskauer Rose LLP and certain of its partners, related to allegedly negligent advice given to the company in connection with income tax implications of the company’s $1.5 billion credit agreement.
As reported, the company’s initially filed its lawsuit as an adversary action in bankruptcy court, but that case was dismissed in February when the bankruptcy court “abstained” from hearing the case. The company subsequently refilled the case in New Your State court in Manhattan, to which Proskauer responded with a counter suit alleging the company made misrepresentations to the law firm in connection with the credit agreement (see “Overseas Shipholding refiles Proskauer suit, but the plot thickens,” LCD, March 13, 2014).
As for the company’s other creditors, recoveries remain the same as under the company’s prior proposed plan. To recap, holders of the company’s 7.5% unsecured notes due in 2024 (with about $148.7 million outstanding as of the petition date) and 8.125% senior notes due in 2018 (with about $303 million outstanding as of the petition date) would be reinstated, following payment of outstanding interest. All other claims, including the company’s 8.75% unsecured notes due 2013 (with about $66.1 million outstanding as of the petition date), the company’s secured facility from the Export-Import Bank of China, or CEXIM (with about $312 million outstanding as of the petition date), and the Danish Ship Finance secured facility (with about $267 million outstanding as of the petition date) would be paid in full in cash, permitting the company to continue to use the ships comprising the security for the CEXIM and DSF facilities.
In addition to the rights offering, the plan would be funded by a $1.35 billion exit facility led by Jefferies Finance, consisting of two $600 million term facilities and two $75 million asset-based revolvers, one each at the company’s international and domestic operating units, respectively.
According to court filings, a hearing to approve the adequacy of the revised disclosure statement has been set for May 23. A hearing to approve the proposed rights offering is set for the same date, as is bankruptcy court consideration of Jefferies’ fees under the proposed exit facility.
According to the disclosure statement, a plan-confirmation hearing would be held July 14. – Alan Zimmerman