$625 million of rated debt instruments
New York, May 23, 2019 -- Moody's Investors Service, ("Moody's") changed
the outlook of International Seaways, Inc. ("INSW")
to stable from negative. Concurrently, Moody's affirmed
INSW's B3 Corporate Family Rating (CFR) and the ratings of the guaranteed
senior secured bank credit facilities (issued by International Seaways
Operating Corporation, "ISOC"), including the
Ba3 rating on the revolving credit facility due 2021 and B3 rating on
the first-lien term loan due 2022, and of its senior unsecured
notes due 2023 at Caa1. Moody's also affirmed the SGL-3
Speculative Grade Liquidity rating, denoting adequate liquidity,
and assigned ISOC a stable outlook.
RATINGS RATIONALE
The outlook change to stable from negative reflects the expectation of
moderately stronger credit metrics over the next year amidst stabilizing
to improving fundamentals in the company's markets after a prolonged
period of pricing pressure. It is also reflects the expectation
that the company will maintain an adequate liquidity profile, supported
by unrestricted cash balances of at least $60-$70
million and ample availability under the undrawn $50 million revolver.
Free cash flow will however remain constrained by elevated capital spending
needs for fleet upgrades in 2019, amidst more stringent environmental
regulations for ballast water discharge and fuel emissions, but
should turn positive over 2020 as the investments abate.
The affirmation of the B3 rating reflects the company's relatively
small size and high (albeit improved) financial leverage approximating
7x (Moody's adjusted), amidst highly cyclical and competitive
markets and vulnerability to freight rate volatility given that a majority
of its vessels trade in the spot market. Although the freight rate
environment is showing signs of improvement and should lead debt-to-EBITDA
leverage to around 6x into 2020, supply-demand imbalances
remain. As well, the leverage level remains elevated for
the company's business risk, noting that funded debt levels
are sizeable following the aggressive pace of fleet renewals over the
past two years. The fleet renewal strategy has improved average
age by 3 years (to 8.7 years), helping the company to reduce
maintenance costs and capitalize on better pricing for certain younger
vessel classes when market conditions permit. The company's
adequate liquidity profile and established position in its core petroleum
transportation markets support the rating.
The senior secured bank credit facilities share an all asset pledge.
However, the senior secured revolver (rated Ba3) ranks ahead of
the term loan (rated B3) because the revolver has a first-out claim
on the assets and benefits from over-collateralization.
The Caa1 rating on the senior unsecured notes reflects the relative position
of this class of debt in priority of claim behind the company's
senior secured liabilities in a default scenario.
The ratings could be downgraded with a material deterioration in the liquidity
profile or business conditions that lead to weaker than expected credit
metrics, including FFO + Interest to Interest sustained below
2x or a lack of progress with reducing debt-to-EBITDA towards
6x. Debt financed acquisitions or shareholder-friendly initiatives
that increase leverage would also drive downwards rating pressure.
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
3x, stronger liquidity and a more conservative capital structure
could also lead to an upgrade.
Moody's took the following actions:
Affirmations:
Issuer: International Seaways, Inc.
.....Corporate Family Rating,
at B3
.Senior unsecured bond due 2023, at Caa1
.....Senior Unsecured Shelf rating,
at (P)Caa1
.....Speculative Grade Liquidity Rating,
at SGL-3
Issuer: International Seaways Operating Corporation
.....Senior Secured First lien Term
Loan, at B3
.....Senior Secured First Lien Revolving
Credit Facility, at Ba3
Outlook actions:
Issuer: International Seaways, Inc.
.....Outlook changed to stable from
negative
Issuer: International Seaways Operating Corporation
.....Outlook assigned at stable
The principal methodology used in these ratings was Shipping Industry
published in December 2017. 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 48 vessels
of varying classes, including ownership interests in 4 LNG carriers
and 2 FSO vessels through joint venture partnerships. Total revenues
were approximately $320 million as of the last twelve months ended
March 31, 2019.
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
