S&P revises Eletson view to positive

Standard & Poor's said it affirmed its B long-term corporate credit rating on Eletson Holdings Inc. and revised the outlook to positive from stable.

At the same time, the agency raised to B+ from B its issue rating on the $300 million first preferred ship mortgage notes due 2022. It assigned a recovery rating of 2 to the notes, reflecting an expectation of substantial recovery (70%-90%) for the noteholders in the event of a payment default.

S&P said the outlook revision primarily reflects its view that product tanker rates will moderate as new vessels are delivered to the global fleet in 2015 and 2016, but will remain relatively high in 2016-2017, as compared with the previous few years. This should continue to support the company's earnings, which strongly improved this year; adjusted EBITDA for the 12 months to June 30 was about $140 million, up from about $103 million in 2014 (pro forma the proportionate consolidation of Eletson Gas).

As a result, the agency anticipates that, despite its largely debt-funded investment in new vessels, Eletson could achieve and maintain credit metrics consistent with a higher rating, such as a sustained ratio of funds from operations to debt of more than 12%.

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