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October 20, 2008

B+H Ocean in "Dutch Auction" share buy back

B+H Ocean Carriers Ltd. (AMEX: BHO) says it will commence a modified "Dutch Auction" tender offer to purchase up to 600,000 shares of its common stock at a price per share not less than $4.00 and not greater than $5.00.

It is making the offer at a time when it says "it is difficult to describe the turmoil being experienced in the current shipping markets, both for ship values and freight rates."

As of last week, B+H owned and operated five medium-range product tankers, a Panamax product tanker and five OBO's along with a 50% interest in a company that is the disponent owner of a 1992-built 75,000 DWT Combination Carrier, effected through a lease structure. Each vessel accounts for a significant portion of the company's revenues.

Over the past several weeks, notes B+H, the shipping industry has suffered significant adverse developments in both dry cargo freight rates and the availability of bank finance for shipowners. Additionally, there has been a widespread loss of trade finance for purchasers and shippers of bulk commodities, particularly dry bulk.

In the past two or three weeks, B+H has sustained the default of two of its dry cargo charterers, ICI on MV SACHEM and Hubel Shipping on MV ALGONQUIN. The rates currently obtainable for short term employment for these vessels are approximately one third of the contractual rate due from the defaulting charterers. An agreement to sell MV ALGONQUIN has been entered into and a 20% deposit received from the buyer for a sale at $18.0 million (a lower price than initially agreed due to market conditions) for delivery in first quarter of 2009. This transaction necessitated a third quarter 2008 vessel impairment charge of approximately $6.0 million.

A second vessel, the 50%-owned OBO SEAPOWET, had been put under contract for sale and was expected to close on October 20, 2008. On October 9, buyers informally advised that they would not be able to close, and official word was received on October 15, with buyers acknowledging that they will forfeit their $5.0 million deposit.

The adverse effects of the global banking and liquidity crisis on shipping and on the company cannot be quantified, but are significant. B+H believes that of its seven current bank lenders, five are presently unable to make or fund new commitments, and the other two are unwilling to do so.

Since December 2006, the company purchased a series of puts on the Panamax Bulkcarrier Index for the average of four time charters, known as "PJAX4TC". A number of the previous quarters of reported earnings have included non-cash losses attributable to the deep decline in market value of these puts. However, in the present extreme dry cargo freight market decline, this portfolio of puts has increased in value dramatically. The extreme volatility of the underlying rates makes it difficult to refer to a "present" value, but results will show a non-cash increase in the value of these puts in excess of $13 million. A number of these puts, above 60% in value, are pledged as additional collateral on the mortgage financing of MV SACHEM and any monthly settlements or sale proceeds will be blocked or used to prepay mortgage debt.

Operations remain on a fairly steady state for vessels other than MV ALGONQUIN and MV SACHEM. MV CAPT. T.J. HUDNER went into the yard for conversion to bulk carrier in August, before the major collapse of dry rates and the loss of the two charters described above. It is not possible to change or stop that work without incurring substantial losses, so it remains on schedule for completion this December.

Notwithstanding recent oil price declines, B+H remains pleased with the employment prospects for an accommodation work barge, "SAFECOM 1," now under construction and scheduled for completion in fourth quarter of 2009.

It is against this background that the tender offer is expected to begin on October 20, 2008, and to expire on November 17, 2008, at 12:00 midnight, New York City time, unless extended. BHO will purchase up to 600,000 common shares in the offer (representing approximately 8.8% of BHO's outstanding common shares.

BHO's stockholders will have the opportunity to tender some or all of their shares at a price within the $4.00 to $5.00 per share range. Based on the number of shares tendered and the prices specified by the tendering stockholders, BHO will determine the lowest per share price within the range that will enable it to buy 600,000 shares, or such lesser number of shares that are tendered and not withdrawn.

All shares accepted in the tender offer will be purchased at the same price per share even if the stockholder tendered at a lower price. If stockholders tender more than 600,000 shares at or below the purchase price per share, BHO will purchase the shares tendered at or below the determined per share purchase price by those stockholders, subject to a preference for "odd lots" tendered, proration and certain other factors. BHO may continue after the tender offer its previously announced plan for the purchase of common shares on the open market from time to time, depending on market conditions.

The tender offer is not contingent upon any minimum number of shares being tendered. The tender offer is, however, subject to a number of other terms and conditions.

BHO's board of directors has approved the tender offer because it believes that the modified "Dutch Auction" tender offer is a prudent use of BHO's financial resources given its current liquidity and prospective capital requirements.

Subject to certain limitations and legal requirements, BHO reserves the right to accept for payment, according to the terms and conditions of the offer, up to an additional 2% of BHO's outstanding shares of common stock (or 136,260 shares) without amending or extending the offer. In exercising this right, it may increase the per share purchase price to allow us to purchase all such additional shares.

BHO believes that the modified "Dutch Auction" tender offer provides a mechanism to provide stockholders with the opportunity to tender all or a portion of their shares and thereby receive a return of some or all of their investment if they so elect. In addition, stockholders who do not participate in the offer will automatically increase their relative percentage ownership interest in BHO and its future operations at no additional cost to them.

None of BHO, its board of directors, the depositary or the information agent is making any recommendations to stockholders as to whether to tender or refrain from tendering their shares into the tender offer. Stockholders must decide how many shares they will tender, if any, and the price within the stated range at which they will offer their shares for purchase by BHO. The company has been advised that none of its directors or executive officers intends to tender shares pursuant to the offer.

D.F. King & Co., Inc. is the information agent for the offer.


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