American Petroleum Tankers’ Golden State
A fuel-shipping firm backed by Blackstone Group LP (BX) has ordered two $130-million tankers from a San Diego shipyard, but there is a catch: the firm won’t proceed unless the U.S. government approves its long-standing request for a $340 million loan guarantee so that it can refinance five ships it already bought from the shipyard.
The conditional deal could intensify a showdown between American Petroleum Tankers LLC and the Department of Transportation’s Maritime Administration, which runs a loan-guarantee program for ship owners.
American Petroleum Tankers sued the government in July, alleging that its request was being torpedoed based on a bias within the Transportation Department against the company’s private-equity ownership. Blackstone holds a majority stake and Cerberus Capital Management LP is also an investor.
The new shipbuilding contract “addresses the Maritime Administration’s focus on the creation of new jobs and it is a demonstration of our long-term commitment to the U.S. shipbuilding industry,” American Petroleum Tanker’s Chief Executive Robert Kurz said.
A Transportation Department spokeswoman did not immediately comment Monday. The department has yet to respond to the allegations in court.
The Maritime Administration formally denied the tanker company’s application for a $340-million backstop shortly after the suit was filed in Washington, D.C.’s federal court, which was close to two years after the initial request for a guarantee.
It isn’t clear how or whether the company’s ownership factored into the agency’s decision.
In a letter briefly posted online in August, Maritime Administrator David Matsuda said the shipping company’s financial figures, including its debt structure, were “troubling.” It also said the request’s size would “exhaust” the program’s resources and that it would be a “departure from prior practice” to make such a large guarantee for ships that had already been built.
Mr. Matsuda said in his rejection letter that the agency would reconsider the request, however.
The loan-guarantee program is intended to “promote the growth and modernization of the U.S. merchant marine and U.S. shipyards,” according to a government website for it.
Blackstone said through a spokesman that it has asked for the “safest loan” in the program’s history “on every statistical basis by a wide margin.”
A Cerberus spokesman didn’t immediately comment.
A spokesman for the shipyard, which is owned by General Dynamics Corp. (GD), declined to comment.
If construction proceeded on the two 600-foot tankers, it would last into 2016 and require as many as 500 workers, Mr. Kurz said. Once built, the ships would each employ about 50 union workers, he said.
The final cost of the new tankers is expected to be in the range of $130 million apiece, according to a person familiar with the matter.
American Petroleum Tankers, based in Plymouth Meeting, Pa., and its owners have spent about $1 million pursuing a federal backstop, according to court filings. With the government’s backing the company could refinance much of the debt it accrued building its fleet at a rate low enough to save it more than $500 million over 20 years, according to people familiar with the company’s finances.
American Petroleum Tankers carries hundreds of millions of dollars of debt with interest rates between 10.25% and 12%, according to court records and the company’s most-recent quarterly report. Government backing would enable the company to refinance more much of its debt at 3.1%, according to people familiar with the matter.
American Petroleum Tankers was founded in 2006 as a joint venture among Blackstone, Cerberus and U.S. Shipping Corp., a fuel-shipping concern that has since had its interest in the business bought out by the private-equity firms. American Petroleum Tankers had five tankers built at the San Diego shipyard. They ply domestic routes and work for the military–jobs that are restricted to U.S.-built and American-crewed vessels under the Jones Act.
-By Ryan Dezember. (c) 2012 Dow Jones & Company, Inc.
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