Moody’s Investors Service (Moody’s) has today changed the outlook of Global Ship Lease, Inc. (GSL, the company) to positive from stable. Concurrently, Moody’s affirmed the B1 corporate family rating (CFR) and B1-PD probability of default rating (PDR).
RATINGS RATIONALE
The rating action reflects Moody’s expectations of continued strong metrics, including Moody’s-adjusted /EBITDA below 3.0x over 2022 and 2023 on the back of a charter backlog at high charter rates. The company also has improved its interest cost through refinancing, for example the $350 million issuance of notes in June 2022. Moody’s also continues to w favorably the high revenue visibility given its long-term charters as well as the increased diversification of its customer and shareholder base.
Since significant vessel acquisition activity in the first half of 2021, GSL has retained its fleet steady at 65 vessels over the last 12 months to June 2022. In the meantime, the company has continued to recharter vessels at higher market rates securing further profit growth for 2022 and likely 2023. As a result, Moody’s metrics are likely to improve further towards strong levels for the current rating, including leverage below 3.0x and FFO + interest /interest expense above 5.0x.
Gross debt has risen in 2021 as a result of the partially debt funded vessel acquisitions, but could reduce due to high ongoing debt amortisation requirements going forward. However, any gross debt reduction may also be affected by the company’s refinancing activity as well as any future use of debt to partially fund vessel acquisition although the company has not done so in the last 12 months to June 2022. The company currently has five unencumbered vessels, which provides additional funding potential and differs from its fully encumbered asset base historically.
While the container market also remains strong with record high charter rates that minimize any rechartering risk at this stage, the market environment becomes less clear into 2023 and 2024. If charter rates drop significantly below the company’s existing charters, rechartering risk could rise.
GSL continues to have a degree of customer concentration with CMA CGM S.A. (Ba2 positive) and A.P. Moller-Maersk A/S (Baa2 stable) accounting for 56% of 2021 revenue, but this concentration has reduced over recent years while the credit quality of key customer CMA CGM S.A. has also improved in recent quarters. Following some divestments of past private equity shareholders, GSL has now also a broad shareholder base.
Moody’s additionally notes that the company has commenced paying a dividend and initiated share buybacks. Moody’s expects the company to cover these outflows from its ongoing cash flows and balance shareholder remuneration in way that Moody’s credit metrics are not adversely affected. This is also supported by the current debt amortisation profile.
LIQUIDITY PROFILE
Moody’s views the liquidity profile as adequate. The company had $96 million of unrestricted cash on balance sheet (including time deposits) as of March 2022. GSL has been and is expected to continue to remain free cash flow generative after interest but before vessel acquisitions and divestments. Moody’s also expects the company to maintain meaningful restricted and unrestricted cash positions also given some minimum liquidity requirements under its debt facilities and for collateral or reserve purposes ($126 million of additional cash used for collateral or required reserve purposes as of March 2022). GSL has no material balloon maturities until 2024, but has mandatory debt amortization currently peaking at $190 million in 2023, before it reduces.
RATING OUTLOOK
The positive outlook reflects Moody’s expectation that metrics are likely to be strong for the rating in 2022 and 2023, based on current charter levels and helped by ongoing debt amortization. Further deleveraging will however also depend on refinancing activity and some potential for partially debt-funded vessel acquisitions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Positive pressure could arise if the business continues to grow and diversify with /EBITDA sustainably below 3x and (funds from operations + interest)/interest sustainably above 5.0x, free cash flow remains visibly positive, rechartering risks remains limited through longer-dated charters and the maturity profile and fleet well managed. In this context, Moody’s also considers the evolution of gross debt and the company’s stated financial policy. Conversely, negative pressure could develop if the company’s (funds from operations + interest)/interest falls to 3x, /EBITDA reaches 4.5x or free cash flow weakens. Downward pressure on the ratings could also result if GSL experiences strained liquidity and difficulties in terms of the rechartering of vessels at adequate rates when contracts expire.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Shipping published in June 2021 and available at Alternatively, please see the Rating Methodologies page on for a copy of this methodology.
COMPANY PROFILE
Global Ship Lease, Inc. is a Republic of the Marshall Islands corporation, with administrative offices in London. GSL owns a fleet of 65 mostly small to medium-sized container vessels. GSL has been publicly traded on the New York Stock Exchange since 2008. Its largest shareholder is CMA CGM S.A., a large global container shipping company. GSL generated revenue of $448 million and company-adjusted EBITDA of $252 million for the year 2021.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on
For ratings issued on a program, series, /class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, /class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the /deal page for the respective issuer on
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Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
