Overseas Shipping Group Inc., controlled by the Recanati family, is sinking under the stormy weather in the shipping industry and the weight of its huge debts.
In 2000, the Recanatis owned two big companies: IDB Holding Corp. Ltd. and OSG, each of which had market caps of $1.1 billion. In May 2003, they sold the controlling shares in IDB to Nochi Dankner at a value of $840 million, and over the years, they sold shares in OSG, although they remained major shareholders. Today, cousins Udi Recanati and Ariel Recanati own 12.6% of OSG, where they have served as directors since the 1990s.
The Recanatis presumably would like to forget 2012 and that OSG's share price fell 92% over the year. In November, the company filed for voluntary Chapter 11 bankruptcy protection with the US Bankruptcy Court for the District of Delaware because of its $2.8 billion debt. The company's bondholders, who were due to receive the semiannual payment in early December, received nothing, and are taking legal action with a number of US law firms.
OSG has a fleet of 112 ships, mostly oil tankers, and has 3,600 employees. It lost $193 million in 2011.
In the announcement of the Chapter 11 filing, OSG said, "The company intends to use the Chapter 11 process to significantly reduce its debt profile, reorganize other financial obligations and create a strong financial foundation for the company’s future." It added that some subsidiaries outside the US had not filed for bankruptcy protection, and, |OSG will continue to serve customers without interruption while it reorganizes its debt. OSG has more than adequate cash to allow the company to continue operating as usual and does not require debtor-in-possession financing."
OSG president and CEO Morten Arntzen said, “We will use the Chapter 11 process to definitively resolve our financial issues. An orderly restructuring in Chapter 11 will provide stability both to OSG and to the entire shipping industry. We expect to emerge from our Chapter 11 reorganization with a solid financial base and clear path to future success."
He added, "During the reorganization, we have more than enough cash to support our operations, and we expect it to be business as usual for OSG’s customers, employees, partners and suppliers."
This optimism has not persuaded OSG's shareholders, and since the announcement of the bankruptcy protection filing and restructuring, they have been organizing against the company, on the grounds that it filed incorrect and misleading financial reports, and other claims.
The New York Stock Exchange relegated OSG to the pink sheets for failing to meet listing conditions.
OSG's market cap has plummeted from its peak of $2.5 billion in July 2007, to just $26 million. In this 5.5-year period, its share price has fallen from over $74 (adjusted for the distribution of dividends) to $0.85, shedding 99% of its value. The value of Recanatis' holding has fallen from $235 million to $3.3 million.
OSG's debt includes bonds, credit lines, and loans. It owes $300 million in bonds issued in 2008, which bear 8.125% interest and are due for repayment in 2018, and another $146 million in bonds issued in 2004, which bear 7.5% interest and are due for repayment in 2024. Most of the debt is a $1.5 billion credit taken in February 2006 and due for repayment in February 2013.
In its financial statements, OSG said that it had $227 million in cash at the end of June 2012, but the current figure is not known as the company since announced that its financial reports published in the past 3.5 years cannot be relied on.