S&P: CP Ships on developing watch

Standard & Poor's said it placed its ratings on CP Ships Ltd., including the BBB- long-term corporate credit rating, the BB+ senior unsecured debt rating and BB+ subordinated debt rating, on CreditWatch with developing implications following the company's announcement that its board of directors has recommended it be acquired by German travel and shipping company TUI AG.

The transaction is subject to acceptance by shareholders representing two-thirds of the CP Ships shares outstanding, as well as regulatory approvals in Canada, the United States, Europe and other countries.

At this time, S&P said, it is unclear how the transaction will be structured and what the combined credit quality of the companies will be. If the acquisition is successful, CP Ships' senior note, convertible debenture and bank line agreements all contain change-of-control provisions that could obligate TUI AG to redeem debt outstanding. In such event, it is also possible that the ratings on CP Ships will be withdrawn.

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