Tanker Company's Stock Plunges after Warning

Citing poor spot rates and high fuel costs, Jones Act tanker company U.S. Shipping Partners L.P. warned Wednesday it may fall out of compliance with certain financial ratio covenants with senior lenders as measured at the end of the second or third quarter.

   Shipping Partners also said it planned to negotiate with its lenders to amend the covenants in order to give it time to pursue strategic alternatives.

   The announcement sent the company's units, traded on the New York Stock Exchange to a new low for the year. They closed at $4.65 a unit, down $2.70. At one point Wednesday the units were trading at $4.01; the high for the past 52 weeks was $22.45.

   U.S. Shipping said there was no assurance that the negotiations to amend these covenants would be successful. 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 it to make distributions on its common units until the partnership is again in compliance.

   The firm has retained Greenhill & Co. LLC and Jefferies & Co. to assist it in exploring strategic alternatives such as sale or recapitalization, sale of new equity or other methods of enhancing the capitalization and liquidity.

   U.S. Shipping said it has experienced increased demand for its integrated tug barges and increased utilization of its chemical fleet since filing last month of its quarterly earnings report, but that 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.

   It also said that despite improved market conditions, utilization and spot market rates remain lower than in the comparable period in 2007.

Source:Americanshipper