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Moody’s cuts Overseas Shipholding, loan, notes
Moody's Investors Service said it downgraded the ratings of Overseas Shipholding Group, Inc., including the corporate family rating to B3 from B2 and probability of default rating to B3-PD from B2-PD, in anticipation of the spin-off of its international business/subsidiary, International Seaways, Inc. (INSW), previously named OSG International, Inc.
The separation is expected to be completed on Nov. 30.
Concurrently, the agency downgraded the first-lien senior secured bank facility to B2 (LGD3) from B1 (LGD3) and the senior unsecured notes due 2021 and 2024 to Caa2 (LGD5) from Caa1 (LGD6).
Moody's also confirmed the Caa1 (LGD5) rating on the company's senior unsecured notes due 2018.
The ratings of the first-lien bank credit facilities borrowed by International Seaways (and guaranteed by Overseas Shipholding prior to the separation) will be withdrawn as those debts will accompany International Seaways upon separation.
The SGL-2 speculative grade liquidity rating was affirmed.
The outlook is negative. These actions resolve the review for downgrade that was initiated on Oct. 24.
Moody’s said the downgrade reflects the combination of the company's higher financial leverage pro-forma for the separation as well as the highly cyclical nature of demand and softening freight environment anticipated in the Jones Act market over the next year.
The rating also considers the smaller size of the post-spin company, as well as the loss of business diversification from the higher margin, albeit more volatile, international operations (International Seaways), which contributed EBITDA that supported Overseas Shipholding’s existing debt obligations, the agency added.
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