Fitch Ratings has published an updated criteria report for rating oil-vessel-backed financing transactions, replacing the prior version published Dec. 14, 2023.

The report outlines Fitch’s criteria for rating transactions backed by long-term charter and services agreements related to offshore vessels used in the production stage. The asset types currently include floating-production storage and offloading units and shuttle tankers.

The updated “Oil-Vessel Backed Financing Rating Criteria” revises the language on determining the strength of the offtaker’s payment obligation and the notching framework applied. Specifically, the updated report incorporates an expanded framework to assess the offtaker’s payment obligation, allowing for greater differentiation, which may result in a notching above the offtaker’s IDR.

The changes emphasize the favorable economics of the offtake contract and its strategic importance to the offtaker/country. This increases the likelihood of payment, as offtakers will prioritize these payments over debt obligations and other operating expenses. This position is supported by a thorough analysis of the legal regime, bankruptcy laws and the emphasis many countries place on the public interest protection.

Fitch expects no impact on existing ratings.
Source: Fitch Ratings