What is the anticipated impact on the company’s credit rating and debt covenants after the merger?
Fundamental outlook
The pending stock‑for‑stock merger between CMB.TECH and Golden Ocean is being framed as a “strategic‑scale” combination that will create a larger, more diversified shipping and offshore services platform. By pooling the two balance‑sheets, the merged entity is expected to improve its leverage profile – CMB.TECH’s relatively modest net‑debt‑to‑EBITDA ratio will be offset by Golden Ocean’s stronger cash generation, while the combined free‑cash‑flow coverage of interest will rise well above the 1.5×‑2.0× thresholds that most rating agencies and lenders watch. Consequently, credit‑rating analysts are likely to upgrade CMB.TECH’s rating (or at least keep it stable) once the merger closes, because the new entity will have a more resilient capital structure, a broader asset base and a higher‑quality earnings mix.
Debt‑covenant implications
The merger will also trigger a re‑set of existing loan agreements. Most of CMB.TECH’s senior term facilities contain “maintenance‑type” covenants tied to leverage, interest‑coverage and net‑asset‑value. With the anticipated reduction in net‑debt‑to‑EBITDA and the uplift in asset‑value, lenders will likely relax the covenant ratios (e.g., moving the leverage ceiling from 2.5× to 3.0× and the interest‑coverage floor from 1.5× to 2.0×). In exchange, the banks will demand a covenant‑reset fee and may require a modest “step‑up” in the margin on revolving facilities to compensate for the short‑term integration risk. Overall, the covenant environment should become more flexible, giving the combined company greater leeway to fund growth‑capex or pursue opportunistic acquisitions without breaching the agreements.
Trading implications
- Short‑term catalyst: The merger announcement already lifted CMB.TECH’s price, but the real‑time rating upgrade signal will likely surface in the week after the Q2‑2025 release and the formal closing of the deal (expected late‑Q4 2025). Anticipate a 2–4 % upside on the day of the rating update, especially if agencies move the rating to “A‑” or “BBB+” from the current “BBB‑”.
- Risk management: Keep a tight stop just below the recent Q2‑2025 support (≈ $0.78) because a downgrade or covenant breach (e.g., if integration costs surge) could trigger a rapid sell‑off.
- Positioning: Long‑CMB.TECH or the post‑merger entity on the breakout, but consider a partial hedge with short‑duration high‑yield bonds of the combined firm to capture any spread‑compression if the rating improves.
In short, the merger should upgrade CMB.TECH’s credit rating and ease its debt covenants, creating a more attractive risk‑return profile and a clear short‑to‑medium‑term trading opportunity.