S&P lifts Golden State Petro notes from junk

Standard & Poor's said it raised its rating on Golden State Petroleum Transport Corp.'s $127.1 million secured term notes due 2019 to BBB- from BB+.

The outlook is positive.

The agency said the upgrade follows the extension of the bareboat charter by Chevron Transport Corp., a Chevron Corp. subsidiary, for an additional two years at a fixed bareboat rate of $28,500 per vessel per day. This rate represents an increase of about 4.8% and will increase the debt service reserve by about $10 million, resulting in a total reserve of about $28 million. This amount is equal to about 21 months of debt service payments, as opposed to the 14 months that accumulated during the initial charter period.

The increase in the reserve and the additional two years of contracted cash flows have the dual effect of reducing the probability of default and enhancing recovery prospects, S&P noted.

The positive outlook reflects long-term charters with Chevron Transport, attractive charter renewal provisions and relatively low break-even charter rates compared with current market-time charter rates, the agency said.

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