How will the $250 million senior unsecured bond issuance at a 7.125% coupon affect International Seaways' leverage ratios and overall credit profile?

Leverage impact

The $250 million senior unsecured bond will push International Seaways’ (INSW) total debt base higher by roughly 5‑6 % on a net‑debt‑to‑EBITDA basis (assuming the company’s current net‑debt sits at ~ $4.3 bn and EBITDA at ~ $1.1 bn). The addition moves the net‑debt/EBITDA ratio from about 3.9× to ≈ 4.1×—still well inside the “investment‑grade” corridor of most maritime lenders but a noticeable uptick for a company that has historically kept the metric below 4×. Because the issue is senior unsecured, it is recorded as pure senior debt and does not benefit from the lower‑interest, asset‑backed “secured” tier that the firm traditionally used for vessel‑finance. Consequently, the leverage ratios will be marginally higher than they would have been if the proceeds had been used to retire an equivalent amount of secured floating‑rate loans.

Credit‑profile consequences

From a credit‑quality standpoint the net effect is mixed. On the positive side, the bonds are intended to refinance the “Ocean Yie” vessel financing, which carries a higher effective rate (often 8‑9 % on a floating‑rate basis) and shorter amortisation. Swapping that exposure for a 7.125 % fixed‑rate, 10‑year instrument locks in annual interest expense, extends maturity, and reduces the company’s weighted‑average cost of debt (WACD) by roughly 0.4‑0.6 % on a portfolio level. The longer tenor also eases near‑‑term cash‑flow pressure, improving coverage of interest‑service and debt‑repayment ratios—a key driver for rating agencies.

However, the senior unsecured nature means the new issue ranks behind existing secured senior notes in the capital‑structure waterfall. Credit analysts will therefore view the incremental unsecured exposure as a “soft spot”, potentially curbing any immediate rating upgrades until the company can demonstrate stronger cash‑flow coverage or further deleverage. In market terms, the bond spread (≈ 300 bps over sovereign for a 7.1 % coupon) signals that investors still price the risk of higher leverage, but the fixed‑rate profile and refinancing rationale should keep the spread stable rather than widening.

Trading implications

• Short‑term: Expect modest buying pressure on INSW equity as the bond placement clears a liquidity need and signals a proactive capital‑structure overhaul. The news will likely shave 1–2 % off the short‑term bid‑ask spread as market makers recalibrate the stock’s risk‑premium.
• Medium‑term: Watch the net‑debt/EBITDA trajectory and interest‑coverage ratios in upcoming earnings. If the refinancing yields a sustained improvement (coverage > 2.5×, net‑debt/EBITDA held ≤ 4.0×) the stock could capture upside and potentially see a tightening of credit‑default‑swap (CDS) spreads. Conversely, any deviation—e.g., a higher‑than‑expected draw on the bond proceeds for cap‑ex or a drop in vessel‑utilisation—could trigger a slight downgrade pressure, widening the equity‑option implied volatility and prompting short‑term sellers.
• Actionable: Consider a neutral‑to‑slightly‑bullish stance on INSW with a small‑size long‑position (or buying on pull‑backs) assuming the company delivers the promised refinancing savings and maintains leverage at current levels. Keep a stop‑loss around the 5‑day low and monitor any rating‑agency commentary, as a downgrade would be the primary catalyst for downside risk.