June 11, 2008
U.S. Shipping Partners seeks to negotiate with lenders
U.S. Shipping Partners L.P. (NYSE:USS) led the WSJ Online list of Biggest Percentage Price Decliners on the New York Stock Exchange at the close today.
Its common units closed at $4.65--a decline of 36.73%. A year ago, the price was above $20.
Today's plunge came after the partnership said: "in order to give the Partnership adequate time to pursue strategic alternatives, the Partnership has, based on discussions with the agent bank for its lenders, determined to enter into negotiations with its lenders to amend certain financial ratio covenants under its senior credit facility."
A statement from the partnership said that "while it experienced increased demand for its Integrated Tug Barges ('ITBs') and increased utilization of its chemical fleet since the filing last month of its Quarterly Report on Form 10-Q for the first quarter of 2008, business conditions remain challenging due to high crude oil prices and reduced demand in the Jones Act market. There can be no assurance that this improved performance will continue in future months. In addition, despite improved market conditions since the filing of the Form 10-Q, utilization and spot market rates remain lower than in the comparable period in 2007.
The partnership has retained Greenhill & Co. LLC and Jefferies & Company to assist it in exploring strategic alternatives, which could include, among other things, a sale or recapitalization of the partnership, the sale of new equity or other methods of enhancing the capitalization and liquidity of the partnership.
Today's statement said that, as previously announced, due to market conditions, the partnership may fall out of compliance with the financial ratio covenants with its lenders as measured at the end of the second or third quarter.
"There can be no assurance that the negotiations to amend these covenants will be successful," said the statement. "If the partnership is not in compliance with its financial covenants, the lenders will have a number of remedies, including preventing the partnership from making additional borrowings under its revolving credit facility and not permitting the partnership to make distributions on its common units until the partnership is again in compliance. The partnership expects that any amendment to its financial covenants will require the payment of fees and a higher rate of interest, which would negatively impact the partnership's results of operations, and will likely require the suspension of the partnership's common unit distribution."