Luxor Capital opens new position in Overseas Shipholding Group
A key overview of Luxor Capital's 2Q14 positions (Part 6 of 12)
Luxor Capital adds a new position in Overseas Shipholding Group
Christian Leone’s Luxor Capital’s top new positions for the quarter ending in June were Melco Crown Entertainment (MPEL), Yahoo Inc. (YHOO), and Constellation Brands, Inc. (STZ). Luxor’s 13G and 13D filings since July revealed new positions in Orbitz Worldwide, Inc. (OWW), Overseas Shipholding Group (OSGB), and Eclipse Resources Corp. (ECR). The fund raised its stakes in RCS Capital (RCAP), BJ’s Restaurants (BJRI), and Altisource Portfolio Solutions S.A. (ASPS), and took activist positions in Altisource Asset Management Corp. (AAMC) and Conn’s, Inc. (CONN).
Luxor Capital added a new position in Overseas Shipholding Group (OSGB) (previously OSGIQ). A 13G filing in August noted that the fund owns 37,320,444 shares. The filing said the fund owns a passive 11.3% stake in Overseas Shipholding Group. In September, hedge funds Paulson & Co disclosed a 19.35% stake in Overseas Shipholding Group, while Cyrus Capital Partners revealed 57,766,268 class A shares, accounting for an 18% stake.
Overview of Overseas Shipholding Group
Overseas Shipholding Group, Inc. is a publicly traded tanker company providing energy transportation services for crude oil and petroleum products in the U.S. and international flag markets.
The company’s operating fleet as of June 30, 2014, consisted of 86 vessels aggregating 8.4 million deadweight tons and 864,800 cubic meters, including 20 vessels that have been chartered in under operating leases. In addition to its operating fleet of 86 vessels, one newbuild was delivered in July 2014, bringing the total operating and newbuild fleet to 87 vessels.
The company operates separate fleets of internationally flagged tankers trading in international markets and the U.S. The company organizes vessel operations into strategic business units that focus on broad market segments: international flag, including crude oil and refined petroleum products, and U.S. flag.
The international flag unit manages international flag ultra large crude carriers (ULCC), very large crude carriers (VLCC), Suezmax, Aframax, Panamax and Lightering tankers, and LR1 and MR product carriers. The U.S. flag unit manages the company’s U.S. flag vessels. Through joint venture partnerships, Overseas Shipholding operates four LNG (liquefied natural gas) carriers and two floating storage and offloading (or FSO) service vessels.
Overseas Shipholding emerges from bankruptcy in August
In August, Overseas Shipholding announced it had emerged from Chapter 11 as a newly reorganized company with “a strong balance sheet, focused strategy, and solid customer base.” The company said it closed on its exit financing agreement, led by Jefferies Finance, which consists of two term loan facilities and two revolving loan facilities, totaling $1.35 billion. The company had filed for bankruptcy protection in November 2012 in the U.S. Bankruptcy Court for the District of Delaware, as it was facing financial issues amid a decline in shipping rates, a slowdown in demand for oil, and rising competition.
In October, OSG’s Class B common stock was listed on the NYSE market under the symbol “OSGB”. Overseas Shipholding said for the first six months of 2014, TCE revenues rose 1% due to a strengthening in rates throughout the International Crude Tankers segment, particularly in the Aframax and VLCC fleets and the continued strength in the Jones Act market benefiting the U.S. flag segment.
Moody’s gave a stable outlook for OSG in June
In June, Moody’s provided a stable outlook to Overseas Shipholding, saying, “the fundamentals of the U.S. Jones Act petroleum transportation market will remain supportive, helping OSG to comfortably service the mostly interest-only debt service of its debt capital following its reorganization. The outlook also reflects that downside risk to freight rates in the company’s international tanker markets should remain contained in upcoming years as the unfavorable gap between ton-mile demand and vessel supply does not meaningfully increase.”
The next part of this series will focus on Luxor’s new position in Eclipse Resources.
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