S&P lowers Great Lakes Dredge

Standard & Poor's said it lowered its corporate credit and senior secured bank loan ratings on Great Lakes Dredge & Dock Corp. to B- from B. At the same time, S&P cut its subordinated debt rating on Great Lakes to CCC from CCC+.

S&P affirmed its 3 recovery rating on Great Lakes' senior secured bank loan rating.

The outlook is negative.

S&P said the downgrade reflects increased industry risk related to the reduction in the federal funding of dredging projects by the U.S. Army Corps of Engineers and the uncertainty around the timing and size of future bid opportunities. As a result, pricing pressures have intensified, and Great Lakes has experienced a 47% decline in year-over-year backlog. These factors, combined with Great Lakes' very aggressive financial policies, have resulted in total debt to EBITDA rising to 6.8x for the 12 months ended June 30, and leverage will likely rise in the near term.

Therefore, S&P said it does not expect that its prior expectation of total debt to EBITDA in the 5x-6x range can be met by the company for several quarters, and the company may need to obtain relief from its financial covenants in the near term.

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