$600 million of rated debt securities
New York, May 30, 2017 -- Moody's Investors Service, ("Moody's") affirmed
the B3 Corporate Family Rating (CFR) and B3-PD Probability of Default
Rating (PDR) of International Seaways, Inc. ("INSW").
Concurrently, Moody's assigned ratings to the senior secured
bank credit facilities issued by International Seaways Operating Corporation
and guaranteed by INSW, including a Ba3 rating to the senior secured
revolving facility due 2021 and a B3 rating to the senior first-lien
term loan due 2022. The ratings on the existing senior secured
revolver due 2019 and senior term loan also due 2019 are unaffected at
this time and will be withdrawn upon transaction close. The SGL-2
Speculative Grade Liquidity rating was also affirmed. The ratings
outlook is stable.
RATINGS RATIONALE
The B3 rating reflects the highly cyclical nature of demand and volatility
in the company's international petroleum transportation markets.
Moody's also expects continued downward pressure on earnings and
cash flow as significant incremental tanker capacity is scheduled to enter
the market over 2017, weighing on freight rates and asset values.
Moody's anticipates that supply growth will likely exceed demand
growth by more than 2% over the near term. Leverage (Debt
to EBITDA) has increased approximately half a turn to around 3x (all metrics
after Moody's standard adjustments) since the company's spinoff
from OSG in November 2016, driven by revenue and EBITDA declines
from the softening freight rate environment. Moody's anticipates
leverage to reach the mid 3x range pro forma for the refinancing.
The rating also reflects INSW's relatively small size and its very
limited history of operating as an independent publicly traded company.
At the same time, Moody's anticipates that tanker demand will
remain supportive over the next year, despite significant new vessel
deliveries, and enable INSW to sustain credit metrics that support
the B3 credit profile. The rating considers the company's
position as a leading player in its crude and refined petroleum transportation
markets as well as its longstanding senior management team and good liquidity
profile. Additionally, the company's chartering-in
of a portion of the fleet allows it to make fleet adjustments when market
conditions warrant, providing a degree of flexibility for cost cutting.
The ratings do not anticipate any meaningful debt financed acquisitions
or dividends and incorporate the expectation that INSW will sustain a
financial profile and policy that supports the B3 rating level.
The SGL-2 rating reflects good liquidity, characterized by
healthy cash balances, expectation of ample availability under the
refinanced $50 million revolving credit facility due 2021 (existing
facility is currently undrawn) and moderately positive free cash flow
after cash outlays for dry-docks and other capital expenditures
and an absence of dividends that the company previously paid to its former
parent company (OSG) prior to the separation. The structure of
the new revolver and term loan is anticipated to be substantially similar
to the existing facilities, with the revolver having a first-out
claim on the pledged assets. The existing revolver has a covenant
floor of $500 million, of which the vessels were valued at
approximately $1 billion as of March 31, 2017.
The stable ratings outlook balances softening freight rate conditions
that will drive a modest decline in credit metrics against Moody's
view that demand fundamentals will remain supportive over the next year,
helping INSW to meet its financial obligations. The stable outlook
anticipates that INSW will maintain financial policies and a capital structure
that support the B3 CFR.
The assigned Ba3 and B3 revolver and term loan ratings reflect Moody's
expectation of their respective recoveries in the liability structure
and incorporate the impact of the CFR.
The ratings could be downgraded if the company's capital structure
or financial policy results in lower-than-expected credit
metrics, including FFO + Interest to Interest approaching mid
2.0 times range on a sustained basis. A material decline
in revenues and/or a deterioration in the cash flow or liquidity profile
could also pressure the ratings as could sizeable debt funded acquisitions.
Shareholder-friendly actions that compromise debt holder interests
could also drive downward ratings momentum.
Upward ratings momentum could occur if INSW deploys its cash in a manner
that would limit potential increases in debt, such as for fleet
investments rather than shareholder returns. Improving market conditions
that drive sustained growth in revenues and earnings with a financial
profile that results in sustained FFO + Interest to Interest above
3.0 times and a capital structure and liquidity profile that is
supportive of higher ratings, could lead to an upgrade.
Assignments:
..Issuer: International Seaways Operating Corporation;
OIN Delaware LLC
....Senior Secured 1st lien Term Loan,
at B3
....Senior Secured First Lien Revolving Credit
Facility, at Ba3
Affirmations:
..Issuer: International Seaways, Inc.
.... Probability of Default Rating,
at B3-PD
.... Corporate Family Rating, at B3
.... Speculative Grade Liquidity Rating,
at SGL-2
Outlook Actions:
..Issuer: International Seaways, Inc.
....Outlook is Stable
The principal methodology used to in these ratings was Global Shipping
Industry published in February 2014. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
International Seaways, Inc., a Marshall Islands corporation,
is a leading provider of ocean-based transportation of crude oil
and refined petroleum in the international market. It operates
its business under two segments: international crude tankers and
international product carriers. The company has a fleet of 55 vessels
of varying classes, including ownership interests in 4 LNG carriers
and 2 FSO vessels through joint partnerships. Total revenues were
approximately $360 million as of the last twelve months ended March
31, 2017.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Yvonne Njogu
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Robert Jankowitz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
