Moody's affirms Teekay, OMI

Moody's Investors Service said it affirmed Teekay Shipping Corp.'s Ba2 corporate family rating, SGL-2 speculative-grade liquidity rating and Ba3 senior unsecured debt rating and OMI Corp.'s Ba3 corporate family rating and B1 senior unsecured debt rating.

The outlook for Teekay is negative, and the outlook for OMI is stable.

The affirmation follows the announcement that Teekay plans to acquire OMI through an acquisition vehicle jointly owned by Teekay and A/S Dampskibsselskabet TORM. The acquisition assigns an enterprise value to OMI of $2.2 billion, including the assumption of OMI's net debt, which totaled $390 million at Dec. 31. The plan is for Teekay and TORM to equally split the cost of the acquisition and divide the assets, with OMI's suezmax fleet of 13 vessels and eight of OMI's product carriers going to Teekay. Moody's expects that Teekay will finance its half of the purchase price entirely with debt and that the company's reported debt will increase by $1.1 billion upon the closing of the acquisition.

The agency said the affirmation reflects its view that the current ratings can accommodate, for a moderate period, the higher leverage and weaker coverage measures that will result upon the closing of the proposed transaction. Pro forma for the transaction, Moody's estimates put the debt-to-EBITDA ratio at more than 6.5x.

The agency said it may downgrade the ratings if it believes delevering is not a near-term priority for the company, if the unfavorable trends in leverage and coverage continue unabated or if Teekay were to apply proceeds of future equity offerings to applications other than to debt reduction.

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