In their release, they note that they have, “implemented a reduction in force intended to improve operational efficiencies in connection with the Company’s restructuring efforts,” and as part of that, Mr. Itkin will be clearing out his office, so to speak, to make room for his immediate successor, Captain Ian T. Blackley, OSG’s former SVP and Head of International Shipping Operations.

This is a particularly interesting leadership change as it comes while OSG is currently under Chapter 11 bankruptcy protection and almost two months after their former CEO Morten Arntzen was let go.

The new long-term bareboat charters – an arrangement to hire a boat without crew or provisions – are for $6,250 per day, almost 50 percent lower than those under the existing charter.

Debt-laden Overseas Shipholding, better known by its earlier ticker symbol OSG, filed for bankruptcy protection last November as questions about its financial statements shut it out of credit markets.

The bankruptcy filing sent companies that lease ships to OSG, including Capital Product, Wilbur Ross-backed Diamond S Shipping and DHT Holdings Inc, scrambling to find alternative customers.

Analysts had said Capital Product’s above-market leases with OSG could be at risk.

OSG has filed a motion seeking court approval of the new charters and approval to “reject” the existing bareboat charters, Capital Product said in a statement late on Thursday.

The new charters, if approved, will be effective March 1.

However, if the charters are rejected, Greece-based Capital Product can make a claim for the difference in the rate between the new and the existing charters, the company said.

(c) 2013 Thomson Reuters, Click For Restrictions

On November 14, 2012, OSG made a voluntary filing for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware, and it is currently subject to bankruptcy proceedings. CPLP had three IMO II/III Chemical/Product tankers (M/T Alexandros II, M/T Aristotelis II and M/T Aris II, all built in 2008 by STX Offshore & Shipbuilding Co. Ltd.) with long term bareboat charters to subsidiaries of OSG. These bareboat charters had scheduled terminations in February, July and September of 2018, respectively, and had rates ($13,000 per day) that are substantially above current market rates.

CPLP has conditionally agreed to enter into new charters with OSG on substantially the same terms as the prior charters but at a bareboat rate of $6,250 per day. OSG has the option of extending the employment of each vessel following the completion of the bareboat charters for an additional two years on a time chartered basis at a rate of $16,500 per day. The new charters remain subject to approval by OSG’s board of directors. As part of its bankruptcy proceedings, OSG has also filed a motion seeking court approval of the new charters and court approval to “reject” the existing bareboat charters pursuant to the Bankruptcy Code. OSG’s motion is scheduled to be heard by the Bankruptcy Court on March 21, 2013. Under the terms of the agreement between CPLP and OSG, the new charters, if approved, will be effective retroactively as of March 1, 2013 (provided that in the case of the M/T Alexandros II, which was delivered back to CPLP on January 22, 2013, no payment and guarantee obligations shall arise prior to the completion of its drydock and re-delivery to OSG, which is expected to take place between March 1 and May 15, 2013). If OSG and its subsidiaries receive court approval to reject the existing charters, the existing charters will be deemed “rejected” as of March 1, 2013. Rejection of each charter constitutes a material breach of such charter, and CPLP is reserving its rights to make claims as a result of this breach for the difference between the reduced amount of the new charters and the amount due under each of the existing charters. No assurance can be given that OSG’s board of directors will approve the new charters, that the Bankruptcy Court will approve any agreement or arrangement entered into between us and OSG, or that we will be successful in pursuing our claims in the bankruptcy proceedings.

About Capital Product Partners L.P.

Capital Product Partners L.P. (NASDAQ: CPLP), a Marshall Islands master limited partnership, is an international owner of a modern tanker, container and dry bulk vessels. The Partnership currently owns 25 vessels, including four Suezmax crude oil tankers, 18 modern MR (Medium Range) product tankers, two post panamax container vessels and one Capesize bulk carrier. All of its vessels are under period charters to BP Shipping Limited, Overseas Shipholding Group, Petrobras, A.P. Moller-Maersk A.S., Arrendadora Ocean Mexicana, S.A. de C.V., Subtec S.A. de C.V., Cosco Bulk Carrier Co. Ltd. and Capital Maritime & Trading Corp.

Details of the alleged debt weren’t immediately available from Kurtzman Carson Consultants LLC, the agent processing claims for Overseas. The company’s 8.125 percent bonds due in 2018 fell as much as 23 percent today to 30 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

“The bonds could be worth zero or very little if that claim were sustained,” Oliver Corlett, an analyst at RW Pressprich & Co. in New York, said by phone.

The claim was filed with Kurtzman Carson on Feb. 11. The IRS labeled the claim a priority, meaning that the agency believes it should be paid ahead of other unsecured and lower- ranking debts.

The New York-based company filed for bankruptcy last year after global shipping rates fell and the company gave up trying to win a federal loan guarantee. Overseas listed assets of $4.15 billion and debt of $2.67 billion in its Chapter 11 petition in U.S. Bankruptcy Court in Wilmington, Delaware.

Daniel H. Golden, an attorney for Overseas with law firm Akin Gump Strauss Hauer & Feld LLP, didn’t immediately return a call seeking comment on the claim.

In bankruptcy, companies have the right to challenge claims filed by creditors. In this case, should the IRS prevail, the claim would outrank the claims of bondholders, Corlett said.

The case is In re Overseas Shipholding Group Inc., 12- bk-20000, U.S. Bankruptcy Court, District of Delaware (Wilmington).

- Steven Church and Alaric Nightingale, Copyright 2013 Bloomberg.

Today, OSG’s President and CEO Morten Arntzen announced his resignation.

Former Senior Vice President and Head of U.S. Flag Strategic Business Unit, Captain Robert Johnston has assumed the role as  President and Chief Executive Officer of OSG effective immediately, OSG says.

“The Board thanks Morten Arntzen for his service, including during recent challenging times,” said Michael J. Zimmerman, Chairman of the Board of Directors of OSG. “The Board is pleased that Bob Johnston is available to lead the company through the next stages of its Chapter 11 reorganization.”

In November, Overseas Shipholding Group filed for Chapter 11 bankruptcy protection after they got shut out of the credit markets following some questionable financial reports which cast doubt over the ship owner’s financial condition over the past three years and threw investors into an uproar.

Not only that, but Bloomberg caught their tankers calling on Iranian ports which wasn’t well received by the United States Congress.  Their credit application to fund a pair of US-built tankers was quickly rejected.

U.S. Bankruptcy Judge Peter Walsh in Wilmington, Delaware, said today he would approve the loans after a group of Overseas’s lenders dropped their opposition to the financing.

“It’s been a bit of a journey to get here,” James L. Bromley, an attorney for Overseas withCleary Gottlieb Steen & Hamilton LLP, said in court.

The New York-based company filed for bankruptcy last year after global shipping rates fell and the company gave up trying to win a federal loan guarantee. Overseas listed assets of $4.15 billion and debt of $2.67 billion in a Chapter 11 filing.

The case is In re Overseas Shipholding Group Inc., 12- bk-20000, U.S. Bankruptcy Court, District of Delaware (Wilmington).

- By Steven Church, (c) 2013 Bloomberg 

US Coast Guard photo

The U.S. Coast Guard on Friday said that it has completed interviews, evidence collection, and a thorough safety inspection onboard the Overseas Reymar tanker and has cleared the vessel to sail. The 752-foot Marshall Islands-flagged tanker has been anchored in San Francisco Bay’s Anchorage 7 after alliding with tower six, also known as the “echo” tower, of the San Francisco Bay Bridge as it was heading out to sea Monday morning.

The Overseas Reymar sustained scrapes and dents to its starboard quarter above the waterline in the incident, but upon inspection the Coast Guard and representatives from the vessel’s Flag State determined that the vessel is safe to sail. The determination was based on a careful assessment of the vessel’s structural damage, and the inspection and testing of critical propulsion, auxiliary, navigation, safety, and environmental protection systems, the Coast Guard said in a statement.

The ship is expected to depart from San Francisco Bay with tug escort at approximately 10 a.m. Friday. The tanker will require repairs before returning to service.

Although evidence collection onboard the Overseas Reymar is complete, the Coast Guard says that the investigation into the incident continues along with the NTSB.

On Thursday, Coast Guard Capt. Cyndi Stowe, commander of Coast Guard Sector San Francisco, called on the Harbor Safety Committee of the San Francisco Bay Region to conduct a swift review of the Critical Maneuvering Areas (CMAs) established in the wake of the 2007 Cosco Busan incident.

Following the high-profile 2007 allision, which resulted in over 50,000 gallons of oil spilled and a prison sentence for pilot John Cota, nine CMAs were designated by the Harbor Safety Committee. In accordance with CMA guidelines, vessels 1,600 gross tons or larger should not transit a CMA if visibility is less than one-half nautical mile. Stowe asked the committee to review the CMAs with a particular focus on the Bay Bridge, which is not currently included.

OSG says there’s no reason to worry about the company’s operations. It’s going to be a rare case where a firm won’t need bankruptcy financing while OSG “expects to generate significant cash flow while in Chapter 11.”

Shares, inactive premarket, are down more than 80% the past month amid bankruptcy-filing fears.

kevin.kingsbury@dowjones.com. (c) 2012 Dow Jones & Company, Inc.

“We are lowering our ratings on the company, including our long-term corporate credit rating to ‘D’ from ‘CCC-’, based on the bankruptcy filing, and removing the ratings from CreditWatch, where we placed them with negative implications on Oct. 22, 2012,” S&P said in a statement.

S&P also lowered their ratings on OSG’s senior unsecured debt to ‘D’ from ‘CCC-’.

Meanwhile, the S&P statement said that the company’s recovery rating will remain unchanged, but added the decision does not take into account any potential tax liabilities that OSG may have.

“The ’3′ recovery rating, indicating our expectation that lenders will receive a meaningful (50%-70%) recovery in a payment default scenario, remains unchanged for now,” the statement said. “However, the company has disclosed a potential tax liability that we estimate could lower the recovery to a 10% to 30% range.”

Based in New York, OSG listed assets of $4.15 billion and debt of $2.67 billion in its Chapter 11 filing today in U.S. Bankruptcy Court in Wilmington, Delaware. The company has more than 100 vessels that transport oil, refined products and natural gas worldwide.

On Oct. 22, the company said in a regulatory filing that it was evaluating options, including bankruptcy, after a tax review prompted its audit committee to consider whether financial statements for the three years leading up to Dec. 31, 2011, should no longer be relied upon.