OSG Offers Senior Notes – Analyst Blog

Moving ahead with its debt restructuring strategies on Monday, Overseas Shipholding Group Inc. (OSG) announced the issue of $300 million aggregate principal amount of senior notes, due 2018, taking the public offering route. For this, the company has appointed Citigroup Global Markets Inc., a wing of Citigroup Inc. (C), Morgan Stanley (MS) and HSBC Securities (USA) Inc., a division of HSBC Holdings Plc (HBC) as joint book-running managers.

 

Overseas expects to utilize the net proceeds from the note offering to reduce or eliminate its outstanding debt obligation under an unsecured revolving credit facility. This will also help in mitigating the high interest cost for the company.

 

Overseas Shipholding continues to take aggressive financial restructuring steps by raising capital from the market in order to relieve itself of the debt obligations and concentrate on the fundamental growth strategies. Earlier this month, the company completed the sale of 3.5 million shares of its common stock to Goldman Sachs Group Inc. (GS) at a cash price of $45.33 per share for a total value of approximately $15.9 million. The net proceeds from this stock offering were also intended to be used for general corporate purposes and to repay certain of its existing debt, although the particulars remained undisclosed.

 

 

Over the last 30 days, 5 of the 13 analysts covering the stock have lowered their estimates for the first quarter of 2010, while the same number of upward revisions was witnessed. Currently, the Zacks Consensus Estimate for first quarter is operating earnings of 24 cents per share, which would be down by 76.5% from the year-ago quarter.

 

The equal number of estimate revisions in either direction for the first quarter indicates a likelihood of resilience on the performance of the stock in the near term.

 

With respect to earnings surprises, the stock has been steady over the last four quarters, with all positive surprises. The average remained positive at 31.8%. This implies that Overseas has surpassed the Zacks Consensus Estimate by 31.8% over that period.

 

The downside potential for the estimate for the first quarter, essentially a proxy for future earnings surprises, currently stands at 16.7%.

 

On Monday, the shares of OSG closed at $42.06, at par, on the New York Stock Exchange.