Moody's: Ratings of Overseas Shipholding on Review for Downgrade
Moody's Investors Service, has placed the ratings of Overseas Shipholding Group, Inc. (OSG) under review for downgrade, including its B2 corporate family and Caa1 senior unsecured ratings, and the B1 and Ba2 senior secured debt ratings of its subsidiaries, OSG Bulk Ships, Inc. (OBS) and OSG International, Inc. (OIN).
The review follows the company's announcement that its Board of Directors has approved the plan to separate its business units into two independent public companies via a spin-off of the international business, OIN.
The spin-off is subject to the satisfaction of certain conditions, including regulatory requirements. The current debt at OIN and at OBS will remain with those entities post separation. Moody's also affirmed the SGL-2 speculative grade liquidity rating.
The review will consider the more modest scale of each independent entity after the spin-off, along with the loss of cash flow and business diversification from two separate businesses.
The review will also consider the pro-forma capital structures, asset coverage and capital investment profiles, as well as the prospects for generating earnings and cash flow in the face of a softening freight rate environment. A ratings downgrade of greater than one notch could be possible.
OSG, a Delaware Corporation, based in in New York, New York, is among the larger players in the ocean transportation of crude oil and refined petroleum products.
The company operates separate fleets of internationally-flagged tankers trading in international markets, through its intermediate holding company subsidiary, OIN, and US Jones Act qualified vessels, through its intermediate holding company subsidiary OBS.
The Jones Act vessels operating mainly in US coastal markets. These two subsidiaries are the respective primary obligors of the rated credit facilities, which are guaranteed by OSG. Consolidated shipping revenues were $951 million as of the last twelve months ended June 30, 2016.
