S&P cuts Trico Marine ratings, still on watch

Standard & Poor's said it lowered the corporate credit ratings on Trico Marine Services Inc. to B- from B and the senior unsecured debt to CCC from CCC+ and placed the ratings on CreditWatch with negative implications.

The rating actions follow the announcement that Trico does not expect to comply with the covenants in its U.S. credit facility as of Dec. 31, given current market conditions.

S&P said the negative rating action results from the need for Trico to amend or exit its U.S. credit facility and likely need for asset sales to provide liquidity for mandatory financial and capital costs in 2004.

The continued poor operating environment in the Gulf of Mexico combined with a weak North Sea market has left Trico with reduced liquidity in the face of daunting interest expense and required capital expenditures totaling roughly $30 million - versus EBITDA that is expected to be around $33 million given the current market conditions.

The negative CreditWatch listing reflects S&P's concern that Trico will be unable to amend the U.S. facility ($35 million outstanding as of Sept. 30) and would be forced to quickly sell assets to ensure that it could meet its senior note interest payment of $11 million in May 2004.

If Trico is unable to amend the facility and is forced to repay the outstanding borrowings on it, the company's ratings will be lowered, the agency said.

S&P said successfully renegotiating Trico's U.S. credit facility would likely alleviate Trico's immediate cash requirements. Nevertheless, the agency said Trico needs to reduce fixed charges, most likely with a market recovery, to allow it to better survive market troughs without the need for asset sales or renegotiation of bank covenants.

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