At 07.52 hours on 11 March 1943 the unescorted Olancho (Master Sigurd Pedersen) was hit by one torpedo from U-183 about 30 miles west of Cape San Antonio, Cuba. The torpedo struck on the starboard side amidships abaft #2 hatch, ripping open the hull and demolishing the wheelhouse and starboard engine wing. The engine room flooded immediately and the port engine could not be stopped thus the ship kept going at full speed in circles until the screw was clear of the water due to the settling by the bow.

At 08.11 hours, a coup de grâce hit the port side between #3 and #4 hatch, causing the ship to sink in 10 minutes. The 41 crew members and 5 armed guards abandoned ship after the second torpedo hit in one lifeboat, on one raft and by jumping overboard. Two men went under with the suction of the sinking ship after they jumped from the stern and one was hit by the turning screw and later died after being picked up by the raft. Seven more survivors clung to a hatch cover. The occupants of the lifeboat and the nine men on the raft were picked up at 12.55 hours by the Hondurian steam merchant Choluteca. The remaining seven survivors were picked up by USS Absecon (AVP 23) on 13 March and taken to Jacksonville. Green phosphorus flares dropped from aircraft were very helpful in assisting the ship to locate the survivors.