Seaways prices $600m debt refinancing

Spinoff of OSG wins favourable terms on Jefferies-led institutional credit line, with eye on growing, renewing tanker fleet.

New York-based International Seaways has sealed terms on an effective $600m refinancing of its institutional credit facility.

The Lois Zabrocky-led company is paying 550 basis points over the London interbank offered rate for the five-year lending, which has been allocated to holders in the marketplace, according to debt market sources.

International Seaways chief financial officer Jeffrey Pribor spoke generally about the deal during his appearance on a panel this morning at the annual Marine Money conference in New York, saying the financing would feature $500m firmly committed, a $50m “accordion” feature and a $50m revolving credit line.

Jefferies deal

The deal was led by Jefferies, which formerly employed Pribor as its head shipping investment banker and also had provided Seaways’ existing credit line. The fundraiser is expected to formally close this week.

While Pribor declined to comment on the terms, he did say the financing will be “covenant light,” with just a single security covenant attached.

The previously mooted effort refinances an institutional line — technically known as a “Term Loan B” — that carried the company out of Chapter 11 bankruptcy restructuring in 2014 when its vessels were still within Overseas Shipholding Group.

876346ed1dfe2c32fd5894cbc6da5cd3 Paddy Rodgers, chief executive of Euronav; Lois Zabrocky of International Seaways; Nikolas Tsakos of Tsakos Energy Navigation; and Ted Petrone, vice-chairman of Navios. Photo: Capital Link  Photo: /

OSG spun off Seaways’ internationally trading vessels last November into a new listed company while going forward as pure US-flag operator.

The old facility started at $600m, but had been paid down to $450m at present. It was priced at 475 basis points above Libor, but carried a shorter tenure — thought to be a factor in the higher margin Seaways is now paying.

The New York owner is expected to use the new liquidity in efforts to expand and replace a diverse but ageing fleet that ranges from medium range products tankers to VLCCs, LNG carriers and a floating storage and offloading unit.

$600m company

“We’re a $600m company right now, and we fully expect to be over $1bn before we’re done,” Pribor said during his panel appearance.

He said the diversity of OSG’s tanker fleet — not always a plus when raising equity in capital markets — had proved to be an advantage in this effort.

“You used to have to be a pure play (in capital markets),” Pribor explained. “I don’t think that was ever desired in credit markets, which view the diversity as a protection. It’s actually a credit positive for us.”

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This was confirmed by Jefferies managing director Drew Weisman, who worked on the deal and sat on the panel beside Pribor.

“Investors look at it as a portfolio,” Weisman said. “Having that diversified (income) stream got a lot of investors comfortable who otherwise wouldn’t have been comfortable.”

A Term Loan B is typically marketed to institutional investors as opposed to traditional banks. While margins usually are higher than what is typically found in the increasingly rare loans provided by shipping banks, covenant terms can be much more liberal, panelists said today.