Fitch Downgrades Oceanografia's IDR to 'B-'

Source: Market Watch

CHICAGO, Jan 28, 2009 (BUSINESS WIRE) -- Fitch Ratings has downgraded the following ratings of Oceanografia S.A. de C.V. (Oceanografia):
--Foreign currency Issuer Default Rating (IDR) to 'B-' from 'B';
--Local currency IDR to 'B-' from 'B';
--US$335 million senior secured notes due 2015 to 'B/RR3' from 'B+/RR3'.
In addition, all of these ratings have been placed on Rating Watch Negative.
The downgrade reflects poor cash flow generation in the third quarter of 2008 which resulted in a latest-12-months (LTM) EBITDA of US$104 million, a decline from US$135 million during 2007. The poor performance of the company during the past quarter exacerbates the company's weak liquidity position.
As of Sept. 30, 2008, Oceanografia's liquidity comprised US$10 million of cash and marketable securities and a US$9 million revolver. Short-term debt was approximately US$200 million. The strong liquidity restrictions in the national and international markets and the difficulty to monetize accounts receivables of about $300 million have raised Oceanografia's refinancing risk. Most of these receivables are with PEMEX, the company's key client, whose accounts receivables can not be securitized under Mexican law.
As of Sept. 30, 2008, Oceanografia had US$633 million of total debt compared to $499 million at the end of 2007, resulting in a leverage ratio (Debt/EBITDA) of 6.1 times (x) compared to 3.7x in 2007. Including Oceanografia's pending vessels acquisitions 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 at the end of the year and the depreciation of the Mexican peso.
The Negative Watch is based on the difficulties that Oceanografia will have to re-establish its liquidity position in the short term and a more uncertain business environment. In 2009, lower oil prices could drive PEMEX to postpone investments or delay payments to Oceanografia. In 2008, the company received covenant relief from its banks. Given the company's current situation, it likely will have to request waivers and/or ask for an extension of maturity dates with its banks.
Oceanografia is a privately held marine contracting service company that provides marine services to PEMEX. The company began operations primarily as an engineering and consulting company over 40 years ago and has grown to be a key provider of vessel chartering, inspection, maintenance and repair. In 2005, Oceanografia entered the underwater pipeline construction business, which is a higher margin, more cyclical segment than Oceanografia's traditional business segments. During 2007, 72% of Oceanografia's revenues were derived from pipeline construction. Maintenance and repair work were the second largest segment of the company's business portfolio, accounting for 17% of revenues, while vessel chartering accounted for the remaining 11% of revenues.
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SOURCE: Fitch Ratings