S&P: Horizon Lines on watch

Standard & Poor's said it placed its ratings, including its BB- corporate credit rating, on Horizon Lines LLC on CreditWatch with negative implications.

The CreditWatch placement follows the May 24 announcement that The Carlyle Group has agreed to sell its interest in Horizon Lines to Castle Harlan Inc., another private equity firm. Castle Harlan's purchase price for Horizon Lines is $650 million, compared with the $315 million paid by The Carlyle Group in 2003.

S&P said that if the acquisition is financed with a substantial amount of debt, Horizon Lines' credit profile may weaken to a level no longer consistent with the current rating. S&P plans to meet with management and representatives from Castle Harlan to discuss the acquisition and financing plans, and the resultant credit profile, to resolve the CreditWatch.

S&P said the ratings on Horizon Lines reflect its high debt leverage, participation in the capital-intensive and competitive shipping industry, and relatively older fleet. These risks are somewhat offset by the barriers to entry afforded by the Jones Act (which applies to intra-U.S. shipping) and stable demand from the company's diverse customer base across the company's various markets.

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