Moody's ups Overseas Shipholding outlook to stable

Moody's Investors Service said it affirmed Overseas Shipholding Group Inc.'s Ba1 senior unsecured debt rating and changed the outlook to stable from negative.

The outlook revision reflects Moody's view that demand for Overseas' shipping services is likely to remain solid over the next 12 to 18 months and that the company will maintain strong liquidity through cash on hand, the Capital Contribution Fund and a large, long-term revolving credit facility, which is undrawn at this time.

The agency said the rating reflects Overseas' leading market position as an operator of one of the world's largest tanker fleets. In addition, the company has repaid a substantial portion of the debt incurred from the February 2005 acquisition of Stelmar Shipping Ltd., reported debt is down from the pre-acquisition levels and debt to EBITDA remains appropriate at about 3x.

The ratings also consider the highly cyclical nature of the shipping sector and anticipate a modest weakening of the credit metrics as shipping rates normalize over time, Moody's said. In addition, Overseas' fleet growth, expected to be financed by charter-in agreements, could increase future leverage and the ratings continue to be constrained by the investigation and indictment by the U.S. Department of Justice regarding alleged violations concerning maintenance of books and records with respect to the handling of waste oils on some of the company's vessels.

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