S&P gives Hurtigruten Newco CCC

S&P said it assigned Hurtigruten Newco AS, the new holding company of Hurtigruten Group AS, a CCC issuer rating and hiked the issue rating on the €300 million bond due 2025, issued by Explorer II AS to CCC+ from CCC-. The recovery rating on the million bond due 2025 is unchanged at 2, reflecting substantial recovery in default (70%-90%; rounded estimate: 75%). The outlook is negative.

The agency also assigned a B- issue rating to the €205 million super senior exit facility, a CCC issue rating to the €345 million senior secured operating company (opco) facility, both issued at Hurtigruten Group, and a CC issue rating to the €668 million secured holding company (holdco) facility issued at Hurtigruten Newco.

“We now assess Hurtigruten Newco's business risk profile as vulnerable. Our view of the group's business position is constrained by its geographic concentration of operations in the Norwegian coast, and the modest fleet size, which expose the group to a high degree of event risk and volatility of profitability and cash flows. Hurtigruten Group, like its peers, was hit hard during the pandemic; it did not have all its vessels return to operation until June 2022 and the group still hasn't recovered its profitability,” S&P said in a press release.

The agency said it expects revenue will only increase by around 7% in 2024 and 10% in 2025, which it believes will limit the group's ability to leverage its still-high operating costs.

However, “The negative outlook reflects our view that the company could face potential default scenarios over the next 12 months due to a liquidity shortfall, absent alternative liquidity sources. Specifically, this would occur if the group could not service its semi-annual interest payments of €40 million due in February 2025 or failed to refinance the €300 million Explorer bond due in February 2025, or if there were a covenant breach, or any other scenario that we consider a default under our criteria.”

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