S&P cuts Great Lakes Dredge & Dock

Standard & Poor's said it lowered its corporate credit rating on Great Lakes Dredge & Dock Corp. to B- from B.

The outlook is stable.

At the same time, the agency lowered the issue-level ratings on Great Lakes' unsecured notes to B- from B. The recovery rating remains 4, which indicates an expectation for average (30%-50%) recovery of principal in the event of a default.

"The downgrade reflects our view that Great Lakes' credit measures and free cash flow are weaker than our assumptions for the 'B' rating due to weaker-than-expected operating performance," S&P credit analyst Robyn Shapiro said in a news release.

"The firm's EBITDA and EBITDA margins have declined as a result of cost overruns in its demolition business and due to lower fleet capacity utilization in its dredging business."

Furthermore, S&P said it now views Great Lakes' liquidity as "less than adequate" because the company potentially faces another financial covenant violation. The headroom under the company's maximum leverage covenant has declined significantly, increasing the potential for a financial covenant violation in 2013.

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