Moody's confirms Teekay

Moody's Investors Service said it has confirmed the debt ratings of Teekay Shipping Corp., completing a review for possible downgrade that was initiated on March 17.

The confirmed ratings include: $64.3 million 8.32% senior secured notes due 2008, rated Ba1; $383 million guaranteed senior secured revolving credit facilities due 2006 and 2008, rated Ba1; $31.6 million guaranteed senior secured term loan due 2005, rated Ba1; $350 million 8.875% senior unsecured notes due 2011, rated Ba2; a senior implied rating of Ba1; and an unsecured issuer rating of Ba2.

Moody's said Teekay's ratings had been placed on review for possible downgrade following the announcement by the company of its proposed purchase of Naviera F. Tapias SA for about $810 million.

At the time of the announcement, Moody's was concerned about the increased levels of debt associated with this acquisition, and whether the cash flow stream provided by Tapias' oil tanker and LNG shipping contracts would be stable and reliable enough to support the increase in leverage.

Since then, Moody's has reviewed details of major contracts associated with Tapias' vessel employment, assessed financing plans relating to the acquisition (both the initial investment as well as for forthcoming newbuilding payments), and considered the operating history of Tapias. As the result, Moody's believes that the cash flows that Tapias will contribute to Teekay's consolidated performance should be adequate to maintain the company's credit fundamentals over the near term, providing an increase in secure, long-term fixed-rate-based revenues from relatively strong counterparties, albeit at lower margins than is typical in higher-risk spot oil tanker trading.

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