Moody’s cuts International Seaways loans, gives B3 CFR

Moody's Investors Service said it assigned a B3 corporate family rating and B3-PD probability of default rating to International Seaways, Inc., formerly OSG International, Inc., to coincide with its spin-off from Overseas Shipholding Group, Inc. (OSG).

The spin-off is expected to be completed on Nov. 30.

Concurrently, the agency downgraded the company's senior secured first-lien revolving facility to Ba3 from Ba2 (LGD1) and the senior first-lien term loan to B3 from B1 (LGD3).

This resolves the review for downgrade for these debt instruments, which were part of the review for downgrade for Overseas Shipholding that was initiated on Oct. 24.

Moody's also assigned a speculative grade liquidity rating of SGL-2.

The outlook is stable.

Moody’s said the B3 rating reflects the highly cyclical nature of demand and volatility in the company's international petroleum transportation markets, and the agency’s expectation of downward pressure on earnings and cash flow as significant incremental tanker capacity is scheduled to enter the market over the next year, weighing on freight rates and asset values.

The rating also reflects post-spinoff transition risks, including International Seaways’ lacking history of operating as an independent publicly traded company, as well as the company's smaller size and less diversified business profile, given the loss of cash flow from the traditionally more stable U.S. Jones Act business that supported its financial obligations.

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