OSG Pulled Loan Bid After Cantor Urged U.S. to Reject It on Iran Sanction
Friday, 24 February 2012 | 00:00
House Majority Leader Eric Cantor asked the U.S. Department of Transportation to reject Overseas Shipholding Group Inc. (OSG)’s application for a federal loan guarantee two days before the company withdrew its bid, according to a letter obtained by Bloomberg.
OSG “is openly flaunting the spirit -- if not the letter” of U.S. sanctions policy toward Iran, Cantor, a Virginia Republican, said in a Feb. 15 letter to Transportation Secretary Ray LaHood.
“I expect that your department will move quickly to deny the company’s application” for the loan guarantee, Cantor wrote.
OSG, based in New York, said Feb. 17 that it was withdrawing an application for $241.8 million in U.S. taxpayer backing after being told by the Maritime Administration that it wouldn’t be approved as submitted, according to a filing with the U.S. Securities and Exchange Commission. The maritime agency, part of the Transportation Department, approved a $210.9 million guarantee in 2011 for a different OSG unit, though it has said that transaction hasn’t closed.
Meghan Keck, a Transportation Department spokeswoman, declined in an e-mail to comment on Cantor’s letter.
Charles Burgess, an OSG spokesman, declined to comment on Cantor’s letter yesterday. He referred to a Feb. 10 statement by Chief Executive Officer Morten Arntzen that OSG “complies with all applicable laws and regulations concerning where and to whom OSG trades its vessels.”
Iran Port Calls
Bloomberg reported Feb. 10 that four ships owned by OSG had called on Kharg Island, Iran’s largest oil terminal, over the past year. The vessels operated in a pool of tankers managed by Tankers International LLC, of Limassol, Cyprus. Arntzen is that company’s non-executive chairman.
One OSG vessel arrived at Kharg Island on Jan. 27, four days after the European Union adopted a phased-in ban on the insurance and transport of Iranian oil.
Tankers International told OSG that due to the EU restrictions and “the inability of owners to maintain insurance cover while trading with Iran,” ships in the tanker pool would no longer call at Iranian ports, Arntzen said Feb. 10.
Cantor, in his letter, said that while the loan-guarantee program helps the U.S. shipbuilding industry, “it strikes me as dangerous to reward companies that are doing business with the world’s most active state sponsor of terrorism with hundreds of millions of dollars in taxpayer funds.”
He asked LaHood to provide him the names of any other companies with pending loan-guarantee applications that have done business in the past five years with Iran or other sanctioned countries such as Syria or North Korea.
Cantor hasn’t yet received a response, Laena Fallon, his spokeswoman, said by phone.
OSG sought the loan guarantee to mortgage two vessels in its fleet and use the proceeds as low-interest financing. The company, which on Feb. 9 suspended its quarterly dividend, will report a loss of $178.6 million this year, down from $204.4 million in 2011, according to the median of five analyst estimates compiled by Bloomberg.
OSG, in its SEC filing, said the loan guarantee was one of a “wide range” of options to improve liquidity and said the withdrawal won’t affect its financial position.