OSG announced the switch in a filing after the close of business on Friday, saying it had determined the equity proposal “to be more favorable to the debtors’ creditors and interest holders than the lender plan.”

The revised deal sees equity holders back a $1.5bn rights offering that is divided into Class A and Class B stock. Any holder than is deemed an accredited investor or qualified institutional buyer is eligible to purchase 11.5 Class A shares or warrants for $3 per security.

Each holder that does not fall into one of those categories or choose not to support the plan is to receive one Class B share or warrant per existing share held.

The lender plan originally backed by OSG would have seen holders of the company’s senior debt -- now mostly hedge funds -- come away with 97% of the equity in the reorganised company. Equity holders were relegated to a total recovery of $61m, which one analyst calculated to be worth about $2 per share.

The lender plan had been backed by a financing commitment of $935m from Goldman Sachs, which has now also been terminated.

The equity-holders plan features a larger commitment from US bank Jefferies: a $600m term loan secured by OSG’s US-flag fleet, a $600m term loan secured by its international fleet, and a $75m revolving loan for each unit designed to provide working capital upon exit from Chapter 11.

Leading the equity group is the Boston-based Brown Rudnick.

Among others signing on behalf of the group: Alden Global Capital, BHR Capital, Blue Mountain Capital, Brownstone Investment Group, Caxton International Ltd, Cerberus Capital Management, Cyrus Capital Partners, Luxor Capital Group, Paulson & Co and Silver Point Capital.