April 3, 2009
Troubles mount for U.S. Shipping Partners
More headaches for troubled U. S. Shipping Partners L.P.
Its lenders have yet again extended the forebearance agreement that lets it keep going, this time until April 30, 2009, but now it looks to be having troubles with the joint venture under which it is building a series of Jones Act products tankers
In an April 1 filing with the SEC, the partnership said that it requires additional time to complete its Form 10-K for the fiscal year-ended December 31, 2008 as it needs to analyze whether the financial condition and results of operations of its joint venture to construct up to nine product tankers (the "Joint Venture") should continue to be consolidated in the Partnership's financial statements "in light of the Joint Venture's class A member purportedly terminating the Partnership's role as managing member of the Joint Venture and reducing the number of directors appointed by the Partnership to the Joint Venture's Board of Directors from three to one based on alleged defaults under the Joint Venture agreement and the Joint Venture's credit facility. "
This follows a March filing in which the partnership said that it had received a notice from the Blackstone Group affiliates that are members of the partnership's joint venture to build five product tankers declaring that:
"(i) a Board Reduction Event (as such term is defined in the Joint Venture's Limited Liability Company Agreement) has occurred and purporting to remove USS Product Carriers LLC, a wholly-owned subsidiary of the Partnership, as the Managing Member of the Joint Venture and designating one of the Blackstone entities as the Managing Member of the Joint Venture, and
"(ii) a Manager Termination Event (as such term is defined in that certain Management and Operating Agreement, dated as of August 7, 2006, by and among USS Product Manager LLC, a wholly-owned subsidiary of the Partnership ("Product Manager"), the Joint Venture and the other parties thereto (the "Management Agreement")) has occurred and purporting to terminate Product Manager's right to provide management and operating services under the Management Agreement with respect to all vessels owned by the Joint Venture other than the Golden State (the only vessel currently being operated by the Joint Venture).
"In addition, the Partnership has received a notice from the agent for the lenders to the Joint Venture asserting events of default under that certain revolving notes facility agreement with the Joint Venture have occurred and that the lenders were intending to foreclose on the Golden State vessel owned by the Joint Venture that the Partnership is managing pursuant to the Management Agreement.
"The Partnership has advised Blackstone that it does not believe that either a Board Reduction Event or a Manager Termination Event has occurred, and therefore that its removal of USS Product Carriers LLC as the Managing Member of the Joint Venture and the termination of Product Manager's right to provide management and operating services to the Joint Venture were improper and not effective. The Partnership has also advised the agent for the lenders that it does not believe that any event of default under the revolving notes facility agreement has occurred and is continuing, and therefore any attempt to foreclose on the Golden State is invalid and unauthorized.
"The Partnership has been advised by NASSCO, the shipyard building the product tankers, that it is exercising its rights under the construction contract with USS Product Carriers LLC to use commercially reasonable efforts to sell and assign Product Carriers' rights under the construction contract to have four product tankers constructed. The Joint Venture had the option, which it did not exercise, to require Product Carriers to assign to the Joint Venture the right to have these four product tankers constructed. These four product tankers are in addition to the five product tankers being constructed for the Joint Venture by NASSCO."