OMI Successfully Buys Back Paper

OMI successfully bought back over $130 million of 10-3/4% bonds in mid-July. The transaction was necessitated by OMI’s strategic refocus, which called for a corporate restructuring and the disposing of several vessels not part of its completely foreign flag repositioning. While the 10-3/4% coupon was reason enough for the refinancing, management needed to refinance primarily because the bonds’ covenants were constraining the strategic actions of the company.

The retired bonds had a covenant structure that severely limited the company’s ability to access further debt and dispose of assets. For some time, the company has been battling to stem the tide of losses, and one of the classic methods of fixing losses in shipping is asset sales. Such sales were limited by the bonds covenants, though management at OMI indicated it was never prevented from completing necessary transactions. OMI indicated that its use of the public debt market was not completely negative and would consider using it again, given the right terms and conditions.

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