Moody's downgrades U.S. Shipping, rates notes Caa1

Moody's Investors Service said it lowered U.S. Shipping Partners LP's senior secured debt rating to B1 and corporate family rating to B2, and also assigned a Caa1 rating to the company's planned $200 million issuance of senior unsecured notes.

The outlook is stable.

The ratings reflect the materially higher financial leverage and lower interest coverage as a result of debt issued to fund the company's very significant fleet expansion program. The agency said the ratings also reflect U.S. Shipping's relatively modest size and the expectation of significantly negative free cash flow that will run at least through 2009.

The ratings also consider the effect of the new joint venture being arranged by U.S. Shipping to finance the separate product tanker new building program that will add an additional nine vessels to U.S. Shipping's fleet. While the joint venture addresses the long-term financing of the product tankers, Moody's said it views the economics of the joint venture as a funding vehicle of U.S. Shipping because U.S. Shipping will likely purchase or charter-in the vessels upon deliveries to the joint venture.

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