Between 12.47 and 13.04 hours on 14 Feb 1945, U-968 fired torpedoes at convoy BK-3 off Kola Inlet and reported one Liberty probably damaged, one Liberty probably sunk, a tanker identified as Norness sunk and a Liberty damaged. However, the only ships hit at this time were Norfjell and the Horace Gray. This attack was probably misinterpreted by U-992 (Falke), which herself attacked convoy and claimed one tanker sunk.

The Horace Gray (Master Charles Fox Brown) in station #13 was hit by one torpedo on the port side at the bulkhead between the #4 and #5 holds, only minutes after the tanker ahead of her had been hit. The explosion blew the hatch covers off and opened a hole 20 feet by 60 feet in the port side and another 20 feet by 20 feet on the starboard side. The ship settled rapidly by the stern until water reached the after deck. 20 minutes after the hit the eight officers, 33 crewmen and 28 armed guards (the ship was armed with one 5in, one 3in and eight 20mm guns) abandoned ship in the four lifeboats and were picked up by two Soviet escort vessels.

One hour after being hit, the master and some crewmen returned to the ship and after raising steam, a small Soviet tug towed her to Kola Inlet. While under tow a crack appeared on the starboard side and the vessel began to sink. Eight hours after being hit, the ship was beached at Tyuva Bay in 69°11.7N/33°36.5E and two days later declared a total loss after all holds were completely flooded. The Horace Gray had arrived Molotovsk on 19 January in convoy JW-64 from New York via Swansea, Wales.

In 1959 the bow of the wreck of Horace Gray was fitted to Tbilisi, which had been badly damaged by U-956 (Mohs) on 30 Dec 1944.