Overseas Shipholding Group, Inc. (NYSE:OSG) (OSG), a provider of energy transportation services for crude oil and petroleum products in the U.S. Flag markets, announced yesterday that it has entered into a Bareboat Charter Party Agreement with the owner of the vessel known as the Oregon Voyager.
OSG will rename the 1999-built U.S. flagged product tanker the Overseas Key West and intends to use this vessel in the U.S. coastwise trade under the Jones Act. The Bareboat Charter extends for 10 years, into 2029. OSG will undertake the vessel’s fourth special survey following the vessel’s expected delivery and expects the vessel to commence commercial operations during the second quarter of 2019.
Sam Norton, OSG’s President and CEO, remarked, “Following closely on our decision to extend all of the leases for our AMSC-owned tankers, the addition of the Overseas Key West to our fleet of Jones Act tank vessels is an important and visible signal of OSG’s continuing commitment to sustaining our leading position in the markets which we serve. The extended duration of this new lease agreement is both an affirmation of our positive outlook for the future as well as a validation of OSG’s reputation as a preferred counterparty in operating Jones Act tank vessels to the high standards demanded by its customers.”
Mr. Norton added, “At current market levels, we expect the Overseas Key West to contribute more than $18 million per annum in time charter equivalent revenue once she enters into service. At this revenue level, we estimate that the Overseas Key West would add approximately $5.5 million in net annual vessel operating contribution, which would be a welcome addition toward building a solid future cash flow profile.”
OSG’s announcement of its new bareboat charter is the latest in a series of transactions previously announced, including:
- The closing on December 21, 2018 of a five-year $325 million term loan credit facility with The Prudential Insurance Company of America and other syndicate lenders (the “Term Loan Refinancing”). OSG’s subsidiary, OSG Bulk Ships, Inc. (“OBS”) and certain of OBS’s subsidiaries obtained this new loan facility to refinance and replace its existing term loan facility, which was fully repaid as a result of the Term Loan Refinancing.
- In connection with The Term Loan Refinancing, the amendment and extension of its secured asset-based revolving loan facility with Wells Fargo Bank, N.A. The amendment reduced the maximum credit line available from $75 million to $30 million and extended the term through August 2, 2019. The amendment also reduced the number of vessels serving as collateral.
- The extension of OSG’s bareboat charter agreements with American Shipping Company ASA (“AMSC”) for nine vessels currently under charter from AMSC. Charter agreements for five of the vessels were extended for additional three-year terms, commencing in December 2019 and ending in December 2022. The charter agreements for the other four vessels were extended for one-year terms commencing in December 2019 and ending in December 2020. OSG previously exercised its option to extend its charter for the tenth vessel that it leases from AMSC, extending that charter into 2025. As a result, all 10 bareboat charter agreements with AMSC have now been extended for additional periods.
- The completion on November 19, 2018 of a financing from Wintrust Commercial Finance, a division of Wintrust Asset Finance Inc., in the amount of $27,500,000, which is secured by first preferred ship mortgages on the Overseas Mykonos and Overseas Santoriniand a guaranty from OSG.
“We had a busy and highly productive fourth quarter,” commented Dick Trueblood, Vice President and CFO of OSG. “Having extended the maturities of all of our material liabilities and having resolved any perceived uncertainty regarding the future deployment of our principal revenue generating assets, we believe that we have enhanced the future visibility of our cash flow streams. We are optimistic that this improved visibility will highlight the value-generating prospects of our business model and provide us with the capability to pursue additional growth opportunities.”