December 5, 2012 / 8:00 PM / 5 years ago

TEXT-Fitch cuts SEACOR Holdings' to 'BB-', outlook now stable

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Dec 5 - Fitch Ratings has downgraded SEACOR Holdings, Inc.'s 
(SEACOR; NYSE: CKH) ratings as follows:

--IDR to 'BB-' from 'BB+';
--Senior unsecured credit facility to 'BB-' from 'BB+';
--Senior unsecured notes to 'BB-' from 'BB+';
--Fitch has assigned ratings to the proposed private placement issuance of $250
million in convertible notes at 'BB-'.
--Fitch does not rate the secured credit facility or newly issued senior
unsecured notes at Era Group Inc., which are non-recourse to SEACOR Holdings.

The Rating Outlook has been revised from Negative to Stable. Approximately $600
million in rated debt is affected.

The downgrade is driven by a number of factors. SEACOR rebounded in Q3 from very
disappointing operational results in the second quarter, but the recovery in the
Gulf of Mexico has been slower than expected and a return to historical EBITDA
levels remains in question. High capital expenditures, the acquisition of 18
liftboats in Q1, and the recent repayment of the $170 million in outstanding
notes due Oct. 1, 2012 reduced the company's overall level of liquidity, which
should be somewhat bolstered by the new issuance and repayment of $125 million
of revolver borrowings.

Additionally, multiple shareholder friendly initiatives have weakened the credit
profile. The company's announcement in October that the board has determined to
pursue a tax free spin-off of the aviation services business via distribution of
all the outstanding shares of Era Group Inc. is a change from previous plans to
hold an IPO of the subsidiary. This decision eliminated the prospect of
significant asset sale proceeds that were expected to flow into SEACOR Holdings
to strengthen the balance sheet.

While the new issuance of convertible notes will improve liquidity, only half of
the $250 million in proceeds are expected to be used to refinance revolver
borrowings. The decision to increase debt to fund share repurchases or a special
dividend before year end 2012 is a new significant negative development for
SEACOR's bond holders and indicates management is willing to operate the
business with significantly more leverage than in previous years.

Fitch no longer expects with confidence that SEACOR will be able to return to
near 3.0x debt/EBITDA within the next 12 months, a level Fitch had previously
outlined as being consistent with maintaining a 'BB+' rating.

SEACOR's ratings are supported by the company's diversity of operations across
different business lines, and the diversity and quality of the company's fleet
of offshore vessels.

According to Fitch calculations, for the quarter ending September 30, 2012,
SEACOR generated latest-12-months (LTM) EBITDA of $198.9 million (excluding the
aviation services segment held within the ERA Group), debt (excluding ERA
balances) after the October 1, 2012 note maturity was approximately $650
million, proforma for $250 million in new convertible notes and $125 of revolver
repayment the total is approximately $775 million.

As a result, Fitch currently calculates debt-to-LTM EBITDA at 3.9x. SEACOR spent
$376.9 million in capex over the LTM period including ERA capex of $161.9
million. EBITDA less capex (excluding ERA from both figures), as a proxy for
free cash flow, was negative ($16.0) million over the LTM period.

Management retains significant flexibility to reduce capital expenditure levels,
but appears to be committed to growing its business lines in anticipation of a
rebound in the Gulf of Mexico and continued global growth in offshore drilling
activity. Accordingly Fitch expects SEACOR to be modestly free cash flow
negative in 2013.

SEACOR maintains liquidity from cash and equivalents of $207.5 million at Sept.
30, 2012, $22.1 million of marketable securities and $179.9 million of
Construction Reserve and Title XI Reserve Funds. Commitments under the company's
credit facility due November 2013 were automatically reduced to $360 million in
November 2012. ($240 million of borrowings were outstanding on the facility at
September 30, 2012. Proforma for $125 in repayment would estimate a $115 million
balance drawn). Restricted cash was used to repay the $170 million of notes that
came due Oct. 1, 2012. SEACOR's $233.5 million in outstanding senior unsecured
notes are due 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.


Fitch will continue to monitor SEACOR's operating performance, industry
conditions, and business line or capital structure reorganization going forward
for catalysts which could result in rating or Outlook changes.

Negative: Future developments that may, individually or collectively, lead to
negative rating action include:

--Continued struggles to rebound especially in the company's core offshore
services segment
--Share repurchases and/or dividends that are significantly larger than $125
million (total proceeds not expected to refinance revolver borrowings) or
additional announcement of such activity in the future
--Pursuing a large, debt-funded acquisition and/or capital expenditure program
--Significant growth of the company's trading operations and/or a move toward
more speculative trading activities

--In order to maintain a 'BB-' rating, Fitch would expect the company to
generally maintain a debt/EBITDA level below 4.0x through the cycle. The company
is currently at 3.9x (excluding ERA Group EBITDA and debt balances) as of Sept.
30, 2012. However, Fitch expects this to decrease modestly as operations

Positive: Future developments that may, individually or collectively, lead to
positive rating action include:

--Significant operational improvement, especially in the company's core offshore
services segment
--Ultimate resolution of business reorganization and capital structure concerns
that are less leveraging and more creditor friendly than currently anticipated
--Asset sales to reduce debt that, net for reductions in expected EBITDA, are

Additional information is available at ''. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Relevant Research:
--'Corporate Rating Methodology' (Aug. 08, 2012).

Applicable Criteria and Related Research:
Corporate Rating Methodology

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