(Dow Jones) Moody’s Investors Service lowered its outlook on Teekay Corp. (TK) to negative from stable, citing concerns about management’s plan to use more equity capital when funding investments or possible asset sales to one of several publicly listed subsidiaries.
The ratings firm said weak fundamentals in the conventional tanker industry have led to significant operating losses in Teekay’s conventional tanker operations, which have dragged down earnings and operating cash flow, putting pressure on already-weak credit metrics.
Moody’s anticipates Teekay’s various entities will continue to pursue asset acquisitions and new projects because of Teekay’s objective to grow the value of its general partner interests in the subsidiaries. But Moody’s warns how such investments are funded will be important to determine if the B1 corporate family rating, already four notches into junk, can be maintained.
Teekay, which provides marine services to the petroleum industry, has posted mixed results in recent quarters as derivatives have affected its bottom line and a glut of tanker space pressures spot market rates.
Moody’s B1 rating reflects Teekay’s position as a leading provider of seaborne transportation of oil and refined petroleum products, though particularly high leverage and sustained high debt balances are concerns.
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April 24, 2024
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