NYSE-listed Overseas Shipholding Group’s (OSG) ratings have been placed under review for downgrade by Moody’s rating agency, after the company received an approval to separate its business units into two independent companies.
Ratings placed under review for downgrade include OSG’s B2 corporate family and Caa1 senior unsecured ratings, and the B1 and Ba2 senior secured debt ratings of its subsidiaries, OSG Bulk Ships (OBS) and OSG International (OIN).
The spin-off of the company’s international business OIN is subject to the satisfaction of certain conditions, including regulatory requirements. The current debt at OIN and at OBS is expected to remain with those entities post separation.
Moody’s also affirmed the SGL-2 speculative grade liquidity rating.
According to Moody’s, 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,” the rating agency said.
Moody’s added that ratings downgrade of greater than one notch could be possible.