Moody's cuts Trico Marine

Moody's Investors Service downgraded Trico Marine including cutting its $250 million 8.875% senior unsecured notes due 2012 to Caa1 from B2. The outlook is negative.

Moody's said the downgrade reflects leverage, negative secular oil and gas producer capital spending trends in two of Trico's three core basins, the Gulf of Mexico (GOM) and North Sea, and substantial excess sector vessel capacity in those basins, continued lack of a visible adequate up-cycle catalyst elsewhere to retain the prior ratings, and the added uncertainty and risk from Trico's largest competitor's (Tidewater) potential game-changing shift in its GOM pricing strategy.

Tidewater's GOM fleet utilization is a very low 24%. The GOM and North Sea continue to fall secularly behind more prospective regions of the world in the global competition for producer capital reinvestment. Also, Norwegian North Sea capital outlays by Norwegian producers will be restrained for tax and political reasons into 2004.

Moody's further noted Trico faces tight bank covenants, ongoing out-migration of GOM drilling rigs to Mexican and West African markets on reduced expectations for GOM drilling, resulting in a reduced fleet of GOM rigs needing vessel support, reduced earning power due to Trico's planned sale of one large North Sea vessel and one Brazilian newbuild to reduce debt and boost liquidity, competitive implications and capital needs of its above average age fleet, the continued influx of new vessels coming to market as competitors' fleet upgrades proceed, and Trico's small participation in currently soft but secularly stronger West African and deepwater GOM markets.

The ratings are supported by expected firmer second quarter 2003 and second half 2003 EBITDA, improving liquidity due to planned asset sales, Trico's foothold in the relatively active Brazilian offshore sector (though it may sell a key asset under construction), and management's intention to take further actions needed to improve Trico's position, including potentially attempting to raise equity to improve its competitive position, Moody's said.

Trico reported first quarter 2003 EBITDA of $4.7 million, down from $8.8 million in the fourth quarter of 2002 and $9.7 million in first quarter 2002. Moody's expects second quarter EBITDA to roughly double. On EBITDA for the 12 months ended March 31, 2003, debt/EBITDA was 12.6x and was 9.6x on annualized expected second quarter 2003 EBITDA. Interest coverage is weak with first quarter 2003 interest of $7.9 million resulting in an EBITDA/Interest ratio of 0.6x.

Moody's cuts Metris, on review

Moody's Investors Service downgraded Metris Cos., Inc. including cutting its senior unsecured debt to Caa2 from B3 and kept it on review for further downgrade.

Moody's said the action reflects Metris' increased near-term funding requirements following its recent announcement that the Office of the Comptroller of the Currency (OCC) had requested and Direct Merchants agreed to eliminate federally insured deposits at Direct Merchants by Sept. 30, 2003. This is some 15 months earlier than the company had previously anticipated, the rating agency noted.

The rating action also reflects the company's limited progress in addressing the longer-term funding challenges it faces, most notably $2.3 billion in securitizations maturing in 2004, as well as the continued weakness in Metris' loan portfolio and its continuing operating losses, Moody's said.

The ratings action reflects Moody's belief that the probability of default for both Metris and Direct Merchants has increased.

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