TEXT-S&P assigns General Maritime ratings
reuters.com Tue March 4, 2003 10:14 AM ET (The following statement was released by the ratings agency)
NEW YORK, March 4 - Standard & Poor's Ratings Services said today it assigned its 'BB' corporate credit rating to General Maritime Corp GMR.N . At the same time, Standard & Poor's assigned its 'B+' senior unsecured debt rating to the company's proposed 10-year $250 million note offering. The long-term rating outlook is stable. New York, N.Y.-based General Maritime is engaged primarily in the ocean transportation of crude oil and petroleum products. The company owns and operates a fleet of 28 oceangoing vessels (23 Aframax tankers and 5 Suezmax vessels).
"Ratings on General Maritime reflect the company's favorable business position as a large operator of midsize Aframax and larger Suezmax petroleum tankers with a strong market share in the Atlantic Basin, diversified customer base of oil companies and governmental agencies, and fairly good access to liquidity," said Standard & Poor's credit analyst Kenneth L. Farer. "These factors are offset by significant, but managed, exposure to the competitive and volatile tanker spot markets and an aggressive growth strategy," the analyst continued.
In January 2003, the company announced it would acquire the 19 vessels owned and operated by Metrostar Management Corp. for $525 million, increasing General Maritime's fleet to 47 vessels (28 Aframax tankers and 19 Suezmax vessels) with capacity equal to about 6% of the world Aframax and Suezmax fleets. The transaction is expected to conclude by April 30, 2003. This acquisition expands General Maritime's scope of operations to Europe, the Mediterranean, and the Black Sea, in addition to increasing the total fleet cargo carrying capacity, with a small decrease in the combined fleet's average age.
Tanker rates increased dramatically in the fourth quarter of 2002, reversing declines during the second half of 2001 and most of 2002, and have remained high, reflecting a cold winter, war premiums associated with a potential conflict with Iraq, and an extension of transit time to supply North America due to the oil company strike in Venezuela. Although rates may moderate from the current high levels, industry fundamentals over the near to intermediate term are expected to remain favorable. Additional rate increases and long-term charter contracts for quality modern tankers are possible due to environmental concerns after the sinking of the tanker Prestige off the coast of Spain. The global Aframax and Suezmax fleets are expected to increase slightly over the next few years, since the delivery schedule represents a somewhat higher percentage of the existing fleet compared with the capacity of ships over 20 years old that will likely be scrapped.
General Maritime's liquidity available under credit facilities and fairly strong market position should enable the company to maintain a credit profile consistent with the rating. Downside risks are limited by the favorable near to intermediate term industry fundamentals and General Maritime's solid market position. However, dramatic improvements are unlikely due to an aggressive growth strategy in a competitive and cyclical market. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www2.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.