Leverage Loan and High Yield Capital Markets Case Study: OSG $1.3B Credit Facilities

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1 Leverage Loan and High Yield Capital Markets Case Study: OSG $1.3B Credit Facilities Marine Money: November 12, 2014 Jefferies LLC

2 Jefferies Bookrun or Lead Arranged Leveraged Finance Transactions Jefferies Overview September 2014 August 2014 December 2013 Global investment bank with capabilities across equity, debt, lending, M&A and restructuring Deep sector expertise with extensive experience across 9 major industry verticals Since January 2012, executed: HC2 Holdings, Inc. $250,000,000 Acquisition of Global Marine Systems Limited Sole Financial Advisor Credit facilities August 2014 Overseas Shipholding Group, Inc. $1,350,000,000 Credit Facilities July 2014 $300,000,000 First Preferred Ship Mortgage Notes Offering Lead Bookrunner July bookrun or advisory banking transactions ($513 billion) 439 bookrun leveraged finance transactions $1,200,000,000 Credit Facility to Finance Acquisition of Marcellus Shale assets $1,170,000,000 Credit Facility to Finance Acquisition of Sheridan Healthcare $1,100,000,000 Senior Secured Notes Offerings Sole Bookrunner $2,820,000,000 Credit Facility to Finance Acquisition by Leonard Green and CVC Capital Partners Trade over 1,000 high yield corporate bond issues globally $2 billion of balance sheet committed to high yield trading June 2014 March 2014 $1,525,000,000 January 2014 $3,650,000,000 $800,000,000 Credit Facility to Finance Merger with DCM Pharmaceutical Senior Unsecured Notes Offerings $450,000,000 $1,350,000,000 Senior Secured Notes Offering Senior Unsecured Notes Offerings Senior Unsecured Notes Offerings Sole Bookrunner

3 High Yield & Leveraged Loan Market Trends Key Points U.S. Leveraged Loan and High Yield Markets represent a $1.2 trillion market LTM Total Leveraged Loans: ~$640 billion LTM Total High Yield Notes: ~$580 billion LTM Despite recent volatility, yields remain near all-time lows (Billions) $800 $600 $400 $200 $0 25% 20% 15% 10% 5% 0% U.S. Leveraged Loan and High Yield Volume High Yield Single B Index LTM High Yield Levearage Loan 10 Year Avg: 8.37% Current 5.89% LTM Average 5.26% 10 Year Average 8.37% Source: Bloomberg.

4 Debt Financing Alternatives Commercial Banks Term Loan A Bank Debt Institutional Lenders Term Loan B Secured High Yield Debt Unsecured Description Senior secured amortizing term loan Notes with bullet redemption at par Maturity 5 years 6-7 years 5, 7 or 10 years Amount Up to $400M $150M+ $150M+ Rate Floating Rate Fixed Rate Pros Relationship based Lowest potential rate Market supports large transactions Ability to limit amortization Flexible structure No required amortization Ability to push leverage level No maintenance covenants Cons Limited size Significant scheduled amortization Maintenance covenants Higher rate than TLA May have maintenance covenants Libor floor Call protection Difficult to amend Likely higher rate Notable Company Transactions Majority of shipping companies OSG, Navios Eletson, Global Ship Lease, Navios, Teekay Navios, Teekay

5 OSG Case Study August 2014 Company Overview One of the largest tanker companies worldwide Overseas Shipholding Group $1,350,000,000 Credit Facilities Key Highlights Strong investor demand allowed broad syndication with tightened pricing and terms Company repaid all creditors and emerged from Chapter 11 Significantly improved credit profile Owns and/or operates 78 U.S. Flag and International Tankers Only major company with significant U.S. Flag and International Flag Fleets Situation Overview Chapter 11 exit required fully underwritten debt and equity financings Two distinct business divisions with different credit profiles Maximize financial and strategic flexibility post emergence Funding Solution Jefferies fully committed to and successfully syndicated $1.35 billion in senior secured credit facilities Exit financing concurrently with $1.5 billion rights offering used to fund full recovery of existing debt claims and tax issues Source: Company Filings.

6 OSG Transaction Overview Overseas Shipholding Group (OSG) $300M Senior Notes at 8.125% $140M Senior Notes at 7.500% $1.5B Equity Rights Offering OSG Bulk Ships (OBS) OSG International (OIN) $600M Term Loan B, 1 st Lien L+425, 5-year $75 Asset-Backed Revolver L , 4.5-year $50 First-Out Credit Revolver L+450, 4.5-year $625M Term Loan B, 1 st Lien L+475, 5-year Source: Company Filings. *Interest rates subject to 1.00% LIBOR Floor.

7 Term Loan B Benefits to OSG Fully-Committed Financing Highly Attractive Amortization Profile No Maintenance Covenants Limited Call Protection Structural Flexibility Fully-Customized Features Source: Company Filings.

8 Other Activity in Leverage Loan and High Yield Market December 2013 September 2014 Transaction $300,000,000 First Preferred Ship Mortgage Notes Offering Lead Bookrunner HC2 Holdings, Inc. $250,000,000 Acquisition of Global Marine Systems Limited Sole Financial Advisor Credit facilities Situation Overview Funding Solutions Refinancing of existing vessel debt Jefferies successfully placed a $300 million First Preferred Ship Mortgage Notes Offering Acquisition financing Jefferies provided fully funded facility for GMSL and Schuff International Outcome Offering well subscribed with strong demand allowed facility to be upsized Jefferies currently in the market with high yield take-out transaction

9 Selected Jefferies Maritime Debt Transactions October 2014 October 2014 September 2014 September 2014 $50,000,000 Senior Unsecured Notes Offering $45,000,000 Senior Unsecured Notes Offering HC2 Holdings, Inc. $250,000,000 Acquisition of Global Marine Systems Limited Sole Financial Advisor Credit facilities $65,000,000 Senior Unsecured Notes Offering August 2014 August 2014 May 2014 December 2013 $25,000,000 Senior Unsecured Notes Offering Overseas Shipholding Group, Inc. $1,350,000,000 Credit Facilities $50,000,000 Senior Unsecured Notes Offering $300,000,000 First Preferred Ship Mortgage Notes Offering Lead Bookrunner October 2013 September 2013 May 2013 December 2010 $86,000,000 Convertible Notes Offering Sole Bookrunner $25,000,000 Add-on to First Preferred Ship Mortgage Notes Offering $200,000,000 First Preferred Ship Mortgage Notes Offering $80,000,000 Convertible Notes Offering

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