At 02.32 hours on 28 Aug 1942, U-165 (Hoffmann) fired a spread of four and a spread of two torpedoes at convoy SG-6 at the north end of Belle Isle Strait in position 51°44N/55°40W, heard three detonations and claimed two ships with 10.000 grt sunk and one ship of 5000 grt damaged. In fact, the fleet oiler USS Laramie (AO 16) and the Arlyn were damaged.

The Arlyn (Master Eyolf Wennesland) was struck by one torpedo on the port side amidships in the engine room. The explosion destroyed the boilers and immediately stopped the engines. The ship settled by the stern but then leveled off and remained afloat with her decks awash. Some of the eight officers, 26 men and one passenger, panicked, jumped overboard and swam to two rafts. The remaining men launched a single lifeboat. The 14 armed guards (the ship was armed with one 4in and four 20mm guns) manned the guns until the last moment, but they never had a target and jumped overboard and swam to the boat. Three officers and nine men died in the attack. The most of the survivors were picked up by the Panamanian steam merchant Harjurand and landed at Sydney. Five men rowed the ten miles to the Newfoundland shore, where they were picked up and taken to Sydney.

At 08.44 hours on the same day, U-517 sank the abandoned Arlyn with a coup de grâce.