S&P cuts Wan Hai outlook to negative

Standard & Poor's said it revised Wan Hai Lines Ltd.'s outlook to negative from stable and affirmed its BBB corporate credit rating and the BBB ratings on the company's overseas convertible bonds and the unsecured corporate bonds of subsidiary Wan Hai Lines (Singapore) Pte. Ltd.

S&P said the outlook revision is based on a weaker-than-expected financial performance in 2005 and concerns that an increasingly challenging operating environment, coinciding with large planned capital expenditures in 2007, are likely to weaken the operator's strong cash flow protection measures.

Due to higher-than-expected bunker and charter hire costs, the company's operating cash flow dropped 18% to NT$8.1 billion in 2005 from NT$9.8 billion in 2004 and operating lease-adjusted funds from operations to total debt dropped to 26% in 2005 from 32% in 2004.

The ratings remain supported by Wan Hai's 20% market share and strong liquidity, the agency said. At Dec. 31, the company had cash, short-term investments and bonds totaling NT$37 billion and long-term debt due in 2006 of NT$4.7 billion.

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