S&P cuts Overseas Shipholding

S&P said it trimmed Overseas Shipholding Group Inc.’s issuer rating to CCC+ from B- and its $325 million term loan to B from B+. The 1 recovery rating on the term loan remains unchanged, indicating an expectation for very high (90%-100%; rounded estimate: 95%) recovery in default.

“The downgrade reflects our expectation for a significant decline in the company's earnings in 2021, which will weaken its credit metrics. OSG provides energy transportation services for crude oil and petroleum products in the U.S. flag markets. The ongoing coronavirus pandemic has reduced the demand for oil and created business uncertainties for many of the company's customers, mainly U.S.-based oil producers, refiners, and distributors,” S&P said in a press release.

The agency noted it views OSG’s liquidity over the next 12 months as less than adequate. “While OSG has committed to sell one of its vessels in the second quarter of 2021, which will likely provide it with additional liquidity, it has significant annual debt amortization, finance lease payments and maintenance capital expenditure (capex) requirements in relative to its operating cash flow. We believe the company's sources of cash will be less than 1.2x its uses over the next 12 months.”

The outlook is negative.

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