S&P puts Champion on watch

Standard & Poor's put Champion Enterprises Inc. on CreditWatch negative including its $200 million 7.625% unsecured notes due 2009 at B- and Champion Home Builders Co.'s $150 million 11.25% senior unsecured notes due 2007 at B-.

S&P said the watch placement follows the recent announcement that Champion has named Al Koch as its new chairman as well as its interim CEO and president, replacing Walter Young, and reflects uncertainty with regards to the company's future operating strategy.

Koch is charged with improving Champion's operating efficiencies and cost structure, and returning the nation's largest manufactured homebuilder to profitability.

Most recently Koch served as the interim CEO at Kmart Corp. Champion was an aggressive consolidator in the late 1990s when the industry's liberal lending practices helped fuel unsustainably high demand for the homes that it produced and retailed, S&P noted.

As is now the case with most industry participants, Champion's sales have been adversely affected by the prolonged recession in the sector, with revenues falling sharply to $1.4 billion in 2002 from a peak of more than $2.5 billion in fiscal year 1999.

Despite ongoing efforts to rationalize its cost structure during this period, Champion's corporate credit rating has been lowered several times over the past three years as a result of ongoing operating losses, S&P added.

Moody's cuts Case

Moody's Investors Service downgraded Case Corp. and Case Credit's senior debt to Ba3 from Ba2. The outlook is negative.

Moody's said the action follows the downgrade of Fiat SpA's senior debt to Ba3 from Ba1.

The downgrade of Case and Case Credit reflects the deteriorating operating and financial position of Fiat SpA, which owns 85% of Case's parent CNH Global NV.

There are significant financial and strategic ties between Fiat and CNH. As a result of these ties, and the heretofore superior credit quality of Fiat, CNH/Case had historically enjoyed a material ratings lift due to the relationship with its controlling shareholder, Moody's said. However the degree of this lift has been significantly diminished by the deterioration in Fiat's own rating and credit profile.

Moody's believes that CNH/Case's current rating level is now more reflective of the company's stand-alone operating fundamentals, competitive position and financial flexibility than in the past.

S&P confirms Hornbeck Offshore

Standard & Poor's confirmed Hornbeck Offshore Services Inc. including its senior unsecured debt at B+. The outlook remains stable.

S&P said the confirmation follows Hornbeck's announced acquisition of five offshore supply vessels for $45 million.

Hornbeck's ratings reflect the company's position in the deepwater OSV market and the diversification provided by its tug and tank barge business.

Solid near-term fundamentals and contract support have provided good financial results and cash flow generation, S&P said. However, high debt leverage, contract-renewal risk, and a speculative new-vessel program temper these strengths.

Hornbeck's 14-vessel OSV fleet enjoyed solid day rates during first-quarter 2003, although utilization dropped as the pace of several expected deepwater Gulf of Mexico development projects slowed (average utilization of 90% with $12,397 average day rates versus 97% utilization and $12,601 day rates for 13 boats during fourth-quarter 2002), S&P noted.

The acquisition of the five 220' OSVs allows Hornbeck to move some of its other vessels to international markets where they can potentially earn better rates and terms than in the Gulf of Mexico spot market. Significant improvement in day rates is not expected in the near term, as the deep water Gulf of Mexico market is congested by an oversupply of vessels, S&P said.

Hornbeck's expected 2003 credit measures reflect the current weakness in the deepwater Gulf of Mexico OSV market, due to a reduction in exploration and development spending by exploration and production companies, offset somewhat by a full year's earnings from new vessels received during 2002. EBITDA interest coverage in 2003 should range between 2.5x and 3x, given the current rates in the spot market for uncontracted vessels, S&P said. Debt leverage will drop as a result of the acquisition, although remain aggressive at about 65%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.