Moody's may cut Overseas Shipholding

Moody's Investors Service said it placed the debt ratings of Overseas Shipholding Group under review for possible downgrade following the announcement by the company of its proposed acquisition of Stelmar Shipping Ltd. for about $1.3 billion, approximately $843 million after taking into account assumption of existing Stelmar debt.

The affected ratings include $150 million 7.5% senior unsecured notes due 2024, rated Ba1; $200 million 8.25% senior unsecured notes due 2013, rated Ba1; $85 million 8.75% senior unsecured notes due 2013, rated Ba1; the senior implied rating of Ba1; and the unsecured issuer rating of Ba1.

Moody's said the review will focus on: (1) additional debt levels that the company will encounter to complete the acquisition of Stelmar, and its effect on liquidity and intermediate term debt leverage and debt service metrics; (2) the level to which the combined fleet's revenue base will be secured by fixed term contracts, versus the extent to which the company will remain exposed to spot tanker markets; and (3) an assessment of the integration of these vessels into the company's current tanker operations, considering expectations for charter rates in the tanker markets at the time these vessels are delivered to the company.

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