NOTE: on July 8, 2020, the press release was corrected as follows: In the first paragraph of the press release, the following was added as the second sentence: “The speculative grade liquidity rating was upgraded to SGL-2.”; the third sentence of the second paragraph of the Ratings Rationale section was changed to: “The company's liquidity, benefiting from its strengthened cash flow profile and an undrawn $40 million revolver, provide a buffer against the anticipated market weakness and should adequately cover cash requirements into 2021”; in the first sentence of the third paragraph of the Ratings Rationale section, the description of the liquidity was changed to “good”; and an “Upgrades” section was added to the debt list. Revised release follows.
New York, June 18, 2020 -- Moody's Investors Service ("Moody's") confirmed
the ratings of International Seaways, Inc. ("INSW"),
including the B3 Corporate Family Rating (CFR) and Caa1 senior unsecured
rating.The speculative grade liquidity rating was upgraded to SGL-2. The outlook is stable. This concludes the review
for downgrade that was initiated on April 1, 2020.
RATINGS RATIONALE
The ratings, including the B3 CFR, reflect the company's
exposure to highly cyclical markets and freight rate volatility as its
vessels trade primarily in the spot market, and its modest scale
in a competitive and fragmented industry. Given these risks,
Moody's anticipates the company will operate with moderate financial
leverage and debt/EBITDA (after our standard adjustments) likely will
fall below 3x in 2020. The leverage profile will benefit from the
combined effect of the recent oil price dislocation from oil oversupply
and substantially lower demand due to the coronavirus crisis, which
has driven much higher demand for floating storage and record-high
freight rates. This also follows a period of recovering industry
fundamentals and stronger pricing conditions over the last year after
a prolonged downturn.
However, with expected oil production cuts and destocking of floating
storage as oil demand gradually recovers with the easing of COVID-19
restrictions, tanker demand is likely to weaken in line with the
broad macro deterioration and freight rates to soften as the storage vessels
re-enter the market. As well, the timing and effects
of the pandemic on INSW's business operations and markets remain
uncertain. The company's liquidity, benefiting from its strengthened cash flow profile and an undrawn $40 million revolver, provide a buffer against the anticipated market weakness and should adequately cover cash requirements into 2021. These
include high mandatary amortization of approximately $60 million
remaining in 2020 and $82 million in 2021. Moody's
expects cash flow from operations to exceed $150 million this year.
Free cash flow, while positive, will be constrained by capital
investments of $31 million for drydocking and about $36
million for fleet upgrades to meet with more stringent emissions regulations.
The company's established position in its markets is a positive
consideration in the rating.
The stable outlook reflects expectations of good liquidity,
including unrestricted cash of over $100 million, to temper
the impact of tanker market fundamentals likely to weaken in the near
term and weigh on credit metrics into 2021, balanced against the
lingering uncertainty of COVID-19.
In terms of ESG considerations, environmental risk is high given
the strong correlation of the industry with fuel/carbon emissions and
ballast water discharge, and increasing regulations to curb these
risks. This can require investments in overhauling vessels to comply
with requirements, putting cash strains on the business.
From a corporate governance perspective, INSW is publicly held and
has a board of directors comprised primarily of independent members.
The company has begun repurchasing shares following its stronger earnings
in recent quarters. Moody's believes these would be curtailed
in the face of weakening market conditions.
Moody's took the following actions:
Upgrades:
..Issuer: International Seaways, Inc.
....Speculative Grade Liquidity, Upgraded to SGL-2 from SGL-3
Confirmations:
..Issuer: International Seaways, Inc.
.... Corporate Family Rating, Confirmed
at B3
.... Senior Unsecured Shelf, Confirmed
at (P)Caa1
.... Senior Unsecured Regular Bond/Debenture,
Confirmed at Caa1
Outlook Actions:
..Issuer: International Seaways, Inc.
....Outlook, Changed To Stable From
Rating Under Review
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
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 Funds From Operations (FFO) + Interest-to-Interest
expected to remain below 2x. Debt financed acquisitions or shareholder-friendly
initiatives that meaningfully increase leverage would also drive downwards
rating pressure.
A ratings upgrade is unlikely in the near term, given expectations
of market fundamentals to weaken and at least until the broader industrial
and economic environment improves. Over time, the ratings
could be upgraded with expectations of improving market conditions with
sustained growth in revenues and earnings. This would result in
FFO + Interest-to-Interest remaining above 3.5x,
stronger liquidity consistent with high rated peers and the maintenance
of a conservative capital structure.
The principal methodology used to in these ratings was Shipping Industry
published in December 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1100802.
Alternatively, 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 40 vessels
of varying classes, including ownership interests in 2 FSO vessels
through joint venture partnerships. Total revenues were approximately
$390 million as of the last twelve months ended March 31,
2020
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security 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.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
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.
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JOURNALISTS: 1 212 553 0376
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