Pricing flexed down 25 basis points to LIBOR plus 21/4% on U.S. Shipping Master's (USSM) $200 million term loan. Proceeds from the facility are being used to back the purchase of a chemical tanker form Exxon Mobil and refinance existing debt from the 2003 acquisition of a chemical tanker from Dow Chemical. The facility will also be used to refinance existing credit facilities, retire a $29 million subordinated seller's note from Amerada Hess Corp., partially fund the construction of an articulated tug barge and pay a dividend to equity holders. In addition to the price flex, the size of the dividend was increased by $2.5 million to $15 million.
Sterling Investment Partners created the company in 2002 through the acquisition of the U.S. Flag tanker operations from Amerada Hess for $200 million. USSM has two chemical and six product tankers that operate under the protection of the Jones Act, which requires vessels used for cargo shipments between U.S. ports to be owned by U.S. citizens, built in U.S. shipyards and manned by U.S. citizen crews. "It sounds like a strong management team, but it's unclear what the assets are worth at the end of the deal," one loan investor said.
The CIBC World Markets-led facility also includes a five-year, $25 million revolver. The credit agreement has a greenshoe option to increase the facility up to an additional $90 million if the company is in compliance with its covenants and has consent of CIBC. The agreement limits dividends, capital expenditures, investments, share repurchases, additional indebtedness and changes to existing charter agreements, according to Standard & Poor's. In addition, 100% proceeds from asset sales, 50% of the net proceeds from equity sales, 50% of excess cash flow and insurance proceeds paid due to loss of a vessel must be used to prepay the bank facility. Two of USSM's operating subsidiaries United States Shipping and United States Chemical Shipping are co-borrowers on the facilities. Leverage will increase from 3.9 times to 4.1 times. CIBC bankers and Sterling officials did not return calls.