NEW YORK--(Business Wire)--
Fitch Ratings has downgraded the following ratings of Oceanografia S.A. de C.V.
(Oceanografia):
--Foreign currency Issuer Default Rating (IDR) to 'CC from 'B-';
--Local currency IDR to 'CC' from 'B-;
--USD335 million senior secured notes due 2015 to 'CCC/RR3' from 'B/RR3'.
All of these ratings remain on Rating Watch Negative.
The downgrade reflects extremely poor cash flow generation in the fourth quarter
of 2008 which resulted in a latest-12-months (LTM) EBITDA of US$60 million, a
decline from US$104 million in the prior quarter and US$135 million during 2007.
Revenue declines in the high-margin pipeline construction segment, postponement
of the Ixtal-Abkatum project and vessel delivery delays drove the negative
results over 2008, particularly in the fourth quarter. The company's poor
performance continues to exacerbate its weak liquidity position.
As of Dec. 31, 2008, Oceanografia's liquidity comprised USD28.2 million of cash
and marketable securities compared to short-term debt of approximately US$191.2
million. The lack of credit in the national and international markets and the
difficulty in monetizing accounts receivables of about USD200 million have
raised Oceanografia's refinancing risk. Most of these receivables are with
PEMEX, the company's key client, whose accounts receivables cannot be
securitized under Mexican law. In April 2009, short-term debt decrease by USD60
million as the company sold the Goliath vessel and pipe-laying equipment to a
related party for USD69 million. The company plans to lease back this vessel in
the future.
As of Dec. 31, 2008, Oceanografia had USD677 million of total debt compared to
USD499 million at the end of 2007, resulting in a very high leverage ratio
(Debt/EBITDA) of 11.3 times (x) compared to 6.1x in the prior quarter and 3.7x
in 2007. Pro forma the sale of Goliath, leverage was 10.3x. Including
Oceanografia's pending vessel acquisition commitments for US$332 million (or
US$221 million excluding Goliath), leverage would increase even further. Credit
protection measures are likely to remain under pressure in the near term due to
the expected lower cash flow generation in the first half of 2009 and the
depreciation of the Mexican peso.
The Negative Watch remains, based on the difficulties that Oceanografia will
have in re-establishing its liquidity position in the short term and a more
uncertain business environment in 2009. With limited free cash flow generation,
the USD18.8 million coupon due on July 15, and the absence of related party
financing, Oceanografia is highly dependent on the collection of its US$200
million of accounts receivable to meet its obligations. Lower oil prices could
drive PEMEX to postpone investments or delay payments to Oceanografia, which
further adds to risk. The company has received covenant waivers from certain
banks, which expire at the end of 2009. The company expects to collect USD90
million in accounts receivables in July which would relieve pressure on ratings
and avoid other covenant waivers to be negotiated in the future.
Oceanografia is a privately held marine contracting service company that
provides marine services to PEMEX, the national oil company of Mexico.
Fitch's rating definitions and the terms of use of such ratings are available on
the agency's public site, www.fitchratings.com. Published ratings, criteria and
methodologies are available from this site, at all times. Fitch's code of
conduct, confidentiality, conflicts of interest, affiliate firewall, compliance
and other relevant policies and procedures are also available from the 'Code of
Conduct' section of this site.
Fitch Ratings, New York
Jose Luis Villanueva, CFA, +1-212-908-9158
Daniel Kastholm, CFA, +1-312-368-2070 (Chicago)
Roberto Guerra, +1-5281-8335-7179 (Monterrey)
Media Relations:
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com
Cindy Stoller, +1-212-908-0526
cindy.stoller@fitchratings.com
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