At 09.41 hours on 15 January 1942 the unescorted Coimbra (Master John Patrick Barnard) was hit by one G7e torpedo from U-123, which had spotted the dim lit navigation lights of the tanker astern while the U-boat was proceeding eastbound following the southern shore of Long Island. The torpedo struck on the starboard side just aft of the superstructure at the forward end of the engine room. A huge towering explosion lit up the night sky and the cargo of oil quickly caught fire and spread across the water. Residents from the Hamptons on Long Island could see the fire at sea 27 miles away and alerted the authorities. At 09.59 hours, a coup de grâce was fired from a stern torpedo tube that struck the tanker on starboard side underneath the funnel in #6 main tank and caused the ship to settle fast by the stern, striking the sea floor after five minutes. Like his previous victim, the Norness, the bow of the Coimbra was sticking out of the water. Hardegen commented: These are some pretty buoys we are leaving for the Yankees in the harbor approaches as replacement for the lightships. The tanker later sank completely.

None of the five lifeboats carried aboard could be safely launched. 19 crew members and six gunners (the ship was armed with one 4in and six machine guns) were lost in the sinking. Nine crewmen rescued themselves on two rafts, while twelve others, including the master, clung to an overturned lifeboat. They managed to right the boat after a struggle but having lost all gear and provisions in it they were unable to bale it out owing to the high swell and were forced to sit waist deep in water in freezing temperatures. Ten crew members, including the master, died of exposure before the last two men were rescued after about 12 hours by USS Rowan (DD 405) (LtCdr B.R. Harrison, USN). This destroyer also received five survivors who had been picked up from a raft by a whaleboat from USS Mayrant (DD 402) (Cdr E.A. Taylor, USN), which had taken four survivors from another raft aboard. One of the survivors died of exposure and shock aboard USS Rowan and was buried at sea on 16 January, the remaining six survivors were landed at Argentia, Newfoundland on 23 January. The four survivors aboard USS Mayrant were landed at Placentia, Newfoundland on 22 January.