International Shipholding pursues bankruptcy protection

The U.S.-based marine transportation company, which has offices in Mobile, New York, Tampa and Shanghai, and its subsidiaries, have filed for Chapter 11 relief in the United States Bankruptcy Court for the Southern District of New York.    International Shipholding Corp., along with certain of its subsidiaries, has filed voluntary petitions for bankruptcy protection under Chapter 11 of title 11 of the United States Code.
   The U.S.-based marine transportation company, which has offices in Mobile, Ala., New York, Tampa, Fla. and Shanghai, filed the petitions in the United States Bankruptcy Court for the Southern District of New York.
   International Shipholding said it intends to continue normal business operations “without interruption” during the bankruptcy proceedings.
   It has 21 U.S. and foreign flag vessels in its actively trading fleet that provide a mix of domestic and international shipping services. Subsidiaries operate a rail car ferry between Mobile, Ala., and Coatzacoalcos, Mexico, pure car truck carriers, and Jones Act ships that carry dry bulk cargo and molten sulfur. It has a variety of other ships in its fleet including heavy lift carriers, bulkers and containerships. (It also has one ship in lay-up).
   It said as of March 31, 19 of its ships were committed under various contract extending beyond 2016 and expiring at various dates through 2021.
   The company, which was founded in 1946 with a single Liberty ship and became a public company in 1979.
   An important U.S. flag shipping company, International Shipholding has eight of the 60 ships in the U.S. Government’s Maritime Security Program. Those ships receive a stipend in exchange for a commitment to make their vessels available in time of war or national emergency.
   According to court documents, as of March 31, International Shipholding had total assets of about $305.1 million and liabilities of $226.8 million. The holders of the five largest secured claims are Regions Bank, $65.8 million; DVB Bank, $32.2 million; Citizens Asset Finance, $17.6 million; Capital One, $6.3 million; and ING Bank, $1.9 million.
   The company said it “has faced significant challenges over the last two years and has had to make difficult decisions to continue to operate as a going concern.”  It has “suffered substantial losses and encountered significant challenges related to complying with its debt covenants and meeting
minimum liquidity requirements to operate.”
   The company has been hard-hit by the downturn in dry-bulk shipping freight rates, and has been exiting the business by selling many of its vessels.
   Under a strategic plan adopted last October it has focused its business on three segments–the rail ferry, PCTC and Jones Act businesses.
   It has shed many vessels from its fleet including: two handysize and one capesize bulkersl, International Shipholding’s equity interests in 15 minibulkers, two asphalt tankers, and two chemical tankers resulting in $38 million used to reduce indebtness. It also sold its office in New Orleans in April  in exchange for relief of $6.2 million owed on the property.
   The company said it has made “significant strides” in accomplishing its strategic plan, reducing debt obligations from $242.9  million at the end of 2014 to $117.1 million at the end of the first quarter of 2016. But it added it  “continues to divest its assets at values that are much lower than previously anticipated, and, as a result International Shipholding continues to lack the necessary liquidity to operate at the required levels.”
   Based on its weak financial position and weak conditions in the shipping industry, “it has been impossible for International Shipholding to refinance all of its existing indebtedness in the near term, come into compliance with its existing facilities, or generate necessary liquidity, leading to the bankruptcy filing.
   In addition, the company has entered into a debtor-in-possession $16 million credit that can be used to fund its working capital needs and facilitate the Chapter 11 process.
   International Shipholding filed a series of “first-day” motions with the United States Bankruptcy Court asking the court to approve, among other things, the payment of wages, salaries and other employee benefits, during the proceedings, as well as payments to certain critical vendors. The company said it expects the court to approve the requests, and to be able to pay suppliers in full for all goods and services provided after the filing date, as required by the Bankruptcy Code.
   “Today, we took a critical step toward right-sizing the Company’s balance sheet,” President and CEO Erik L. Johnsen said in a statement. “While the company is facing challenges with its debt and capital structure, we believe our core business segments are performing satisfactorily. During the Chapter 11 process we look forward to continuing to provide our customers the same high quality, reliable shipping services they’ve come to consistently expect from us.”
   International Shipholding Corp. subsidiaries include Central Gulf Lines, Inc.; Waterman Steamship Corporation; United Ocean Services, LLC.; LCI Shipholdings, Inc.; CG Railway, Inc.; LMS Shipmanagement, Inc.; and East Gulf Shipholding, Inc.