Overseas Shipholding Group Inc.#s Amended And Extended $380 Million Term Loan Rated #B+# (Recovery Rating: #1#)

Stocks and Financial Services Press Releases Friday February 9, 2018 13:02
NEW YORK--9 Feb--S&P Global Ratings

NEW YORK (S&P Global Ratings) Feb. 8, 2018--S&P Global Ratings today assigned its 'B+' issue-level rating and '1' recovery rating to Overseas Shipholding Group Inc.'s proposed amended and extended $380 million term loan due 2022. The '1' recovery rating indicates our expectation for very high recovery (90%-100%; rounded estimate: 95%) in the event of a payment default.

At the same time, we affirmed our 'B+' issue-level rating on the company's asset-based lending (ABL) revolver due February 2019. The '1' recovery rating remains unchanged, indicating our expectation for very high recovery (90%-100%; rounded estimate: 95%) in the event of a payment default.

OSG is seeking to amend its existing term loan agreement and extend the maturity of the facility by three years to August 2022. As part of this transaction, the company plans to use cash from its balance sheet to repay (at par) $75 million of its senior secured term loan.

The developing outlook on OSG reflects that we could affirm, lower, or raise our ratings on the company following the transaction. If OSG completes the refinancing as proposed, we expect that it will maintain sufficient liquidity to meet its operational requirements over the next 12 months. In addition, we believe that the transaction will cause the company's debt-to-EBITDA to increase above 6x in 2018 and 2019 as its funds from operations (FFO)-to-debt ratio falls below 10%.

We could lower our ratings on OSG over the next year if one or more of the following occur: the company faces challenges while refinancing its upcoming maturities; its liquidity position deteriorates to the point that we revise our liquidity assessment to less than adequate or weak; we come to believe that OSG is dependent upon favorable business, financial, or economic conditions to meet its financial commitments; or we come to view the company's financial obligations as unsustainable over the long term regardless of whether it will face a credit or payment crisis in the next 12 months.

On the other hand, we could raise our ratings on OSG over the next year if it completes the refinancing transaction as proposed and the conditions in the domestic liquid shipping industry improve due to a rebalancing of industry capacity, causing its FFO-to-debt ratio to increase to the low-double-digit percent area for a sustained period while it maintains adequate liquidity.

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