TEXT-Fitch revises SEACOR Holdings outlook

Thu May 24, 2012 4:15pm EDT

May 24 - Fitch Ratings has affirmed SEACOR Holdings' (SEACOR;	
NYSE: CKH) Issuer Default Rating (IDR) and debt ratings as follows:	
	
--IDR at 'BBB-';	
--Senior unsecured credit facility at 'BBB-';	
--Senior unsecured notes at 'BBB-'.	
	
The Rating Outlook is has been revised from Stable to Negative. Approximately 	
$1.0 billion in total debt is outstanding.	
	
SEACOR's ratings are supported by the company's diversity of operations across 	
different business lines, and the size, diversity and quality of the company's 	
fleet of offshore vessels. The company's credit profile is further supported by 	
management's willingness to maintain large cash and securities balances 	
throughout industry cycles, which have resulted in lower leverage levels as 	
measured on a net debt basis. However, as evidenced by the $319 million special 	
dividend in the fourth quarter of 2010, cash balances are not necessarily 	
earmarked to support debt balances.	
	
The Negative Outlook is driven by a number of factors. The offshore services 	
segment is beginning to rebound from the oil price collapse in late 2008 and the	
drilling moratorium in the U.S. Gulf of Mexico. However this rebound has been 	
slower than previously anticipated and performance remains weak relative to 	
pre-2008 levels. This situation combined with increased capital spending drove 	
negative free cash flow over the latest-12-month (LTM) period ended March 31, 	
2012 of $(259) million. 	
	
Further, SEACOR's wholly owned aviation services subsidiary, Era Group Inc., 	
closed a $350 million senior secured revolving credit facility in December 2011.	
ERA has also filed an S-1 indicating SEACOR's interest in issuing new equity at 	
the ERA level. Structural subordination of debt at the SEACOR level is a 	
concern, especially because aviation services had some of the most stable 	
operating performance through the downturn, and it has been the fastest growing 	
business line.	
	
 	
	
Additional risks include the potential for increased acquisition activity in all	
sectors that SEACOR participates in, combined with increased commodity trading 	
activity at SEACOR. 	
	
Fitch will continue to monitor SEACOR's performance and industry conditions 	
going forward for catalysts which could result in rating or Outlook changes. 	
Negative rating action would likely be considered if the company experiences 	
continued struggles to rebound in offshore services. 	
	
Additionally, if the company became more aggressive with share repurchases 	
(particularly in the face of weaker market conditions), or if debt levels were 	
to rise significantly above current levels (given the existing asset base), 	
negative rating action could be considered. Pursuing a large, debt-funded 	
acquisition and/or large, debt-fund aggressive capital expenditures also could 	
result in negative rating action. 	
	
In order to maintain an investment grade credit rating, Fitch would expect the 	
company to generally maintain a debt/EBITDA level well below 3.0x through the 	
cycle. The company is currently at 3.9x as of March 31, 2012. However, Fitch 	
expects this to decrease as operations improve and the $171 million note 	
maturity due Oct. 01, 2012 approaches. 	
	
For the quarter ending March 31, 2012, SEACOR generated LTM EBITDA of $258.9 	
million and finished the period with debt of $1,004.1 million. As a result, 	
debt-to-EBITDA is currently 3.9x, and interest coverage is currently 5.2x. 	
SEACOR generated negative free cash flow (FCF) during the LTM period driven by 	
the increased capital spending. 	
	
Management retains significant flexibility to reduce capital expenditure levels,	
but appears to be committed to growing its business lines in anticipation of a 	
strong rebound in the Gulf of Mexico. Accordingly Fitch expects SEACOR to be 	
modestly free cash flow negative in 2012. 	
	
SEACOR maintains liquidity from cash and equivalents of $282.0 million at March 	
31, 2012, $26.0 million of restricted cash, $68.6 million of marketable 	
securities and $259.9 million of Construction Reserve and Title XI Reserve 	
Funds, its revolving credit facility due November 2013, and cash flow from 	
operations. Commitments under the company's $405 million credit facility will 	
shrink to $360 million in November 2012. $125 million of borrowings were 	
outstanding on the facility at March 31, 2012. SEACOR's next maturity is October	
1, 2012 when the company's remaining 5.875% senior unsecured notes mature 	
(approximately $171 million). The remaining $234 million of SEACOR notes will 	
mature in 2019.	
	
Key covenants are primarily associated with the company's senior unsecured 	
credit facility and include minimum interest coverage (3.0x covenant level), 	
maximum secured debt to total capitalization (25% covenant level) and maximum 	
funded debt to total capitalization (50% covenant level). SEACOR currently 	
maintains an adequate cushion to covenant levels and is not anticipated to 	
violate any covenants.
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