Moody’s cuts Harvey Gulf, facilities

Moody's Investors Service said it downgraded Harvey Gulf International Marine Corp.'s (HGIM Corp.) corporate family rating to Caa3 from Caa2, probability of default rating to Ca-PD from Caa3-PD and senior secured term and revolving credit facility rating to Caa3 from Caa2.

The outlook remains negative.

Moody’s said the downgrade to Caa3 reflects Harvey Gulf’s escalating financial leverage and weak liquidity.

Although the company is relatively better positioned in its peer group with a moderate portion of its utilization coming from firm contracts through 2017 and beyond, its debt to EBITDA ratio by year-end 2017 will be nearly 10 times (per Moody's calculations) and worsen through 2018.

Given the anemic offshore activity and oversupply of the OSVs, Harvey Gulf's current utilization and day rates for the non-contracted vessels operating in the spot market are not expected to improve through 2017, the agency added.

The company is expected to have generated approximately $160 million of EBITDA in 2016, but Moody's said its outlook for Harvey Gulf's 2017 EBITDA will result in heightened liquidity stress, with increased risk of breaching minimum adjusted EBITDA covenant toward the end of 2017.

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