At 06.36 hours on 23 Nov 1942 the unescorted Caddo (Master Paul B. Muller) was torpedoed by U-518, while proceeding on a zigzagging course, changing every six to nine minutes. The torpedo struck the port side at the pump room, just forward of the after bulkhead. The explosion ripped up the deck, tore a huge hole in the side, flooded the pump room and destroyed a lifeboat and a raft. As the Caddo began to settle by the stern the watch below secured the engines. The survivors of the complement of ten officers, 32 men and 17 armed guards (the ship was armed with one 4in, one 3in, four 20mm and two .30cal guns) abandoned the ship after 30 minutes in three lifeboats and three rafts.
The tanker sank stern first at 08.30 hours and ten minutes later, the U-boat surfaced and took the master and the chief officer as prisoners. The boat in charge of the second mate with 17 men set course for Bermuda, but this boat capsized twice in heavy seas during the night of 7 December. Eight men drowned and three others died after the boat was righted. After 15 days at sea, the remaining three crewmen and three armed guards in this boat were picked up by the Spanish motor merchant Motomar in 38°10N/35°24W, 650 miles south of where the Caddo sank. On 24 December, they were landed at Marcus Hook, Pennsylvania and hospitalized. The 40 men in the other two lifeboats were never seen again.

The master Paul B. Muller died later in a POW camp and the chief officer was repatriated in 1945.