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ARM MERCHANT SHIPS?
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Selected crew should be trained and have guns available
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No guns on merchant ships, ever

August 2, 2009

Rand Logistics makes offer for U.S. Shipping Partner assets

According to an SEC filing, Rand Logistics, Inc. (NASDAQ: RLOG) has written bankrupt U.S.Shipping Partners offering it an alternative to its present plan of reorganization. In its letter, Rand says it has completed a comprehensive review of U.S. Shipping's present plan and believes "that the recoveries it describes for the Debtors' creditors are built on unrealistic assumptions which would render the Reorganized Debtors insolvent almost immediately upon emergence. and that, as currently drafted, it "presents significant issues of feasibility."

New York City headquartered Rand Logistics (formerly Rand Acquisition Corp.) was started as a "blank check" company in June 2004. In March 2006 it acquired Lower Lakes Towing and its affiliates Grand River and Lower Lakes Transportation. Today it he only operator in the Great Lakes region that provides domestic port-to-port services in both Canada and the U.S., operating both U.S. flagged and Canadian flagged vessels in compliance with the Jones Act in the U.S. and the Canadian Marine Act in Canada. Rand owns a fleet of nine fresh water River Class self-unloading carriers, two bulk carriers and one integrated self-unloading tug/barge unit.

Now it is evidently looking beyond the Great Lakes. Rand's proposal, which it values at $225 million, would see it acquire substantially all of U.S. Shipping's assets, excluding cash on hand, and also assume its contracts of affreightment and time charters.

The ITB New York, the ITB Baltimore, the ITB Philadelphia, the ITB Mobile and the Sea Venture would be placed in a new entity ("VesselCo"), with 100% of the equity issued to U.S. Shipping's creditors; Rand would bareboat charter and manage the five vessels, with each vessel's charter period ending when the vessel is sold or 30 days prior to its next scheduled drydocking. During the charter period, Rand would actively market the five vessela for sale on behalf of VesselCo. The Retained Vessels have been valued at between $10.5 million and $13 million in the liquidation analysis included in the draft Disclosure Statement.

The other U.S. Shipping assets acquired in the proposed deal would be owned by a newly-formed, Rand subsidiary "New U.S. Shipping." New U.S. Shipping would have aggregate outstanding indebtedness at closing of approximately $135.0 million, as well as access to a $20.0 million revolving credit facility. Rand says its existing lender would provide this financing.

Rand would pay $160 million plus $60 million in aggregate principal amount of newly issueed senior notes, with a six-year maturity and a cash interest rate of 10%, payable semi-annually and warrants to purchase 750,000 shares of Rand common stock at an exercise price of $8.00 per share and an expiration in August 2013.

To fund a portion of the cash consideration, Rand plans to issue approximately $30 million of common equity. Alternatively, Rand would be prepared to issue this common stock directly to the creditors in lieu of all or a portion of the cash and note consideration. Rand says it has confirmations from senior creditors who would take at least one-third of the common equity required in lieu of cash and note consideration.

READ THE SEC FILING HERE


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