Moody's lifts Horizon Lines view to positive

Moody's Investors Service said it changed the outlook of H-Lines Finance Holding Corp. and Horizon Lines, LLC to positive from stable and affirmed the companies' ratings, including H-Lines' B2 corporate family and probability-of-default ratings and Caa1 senior unsecured discount notes (LGD6, 94%) and Horizon Lines' B3 senior unsecured notes (LGD4, 69%).

Horizon Lines' senior secured debt was affirmed at Ba2 (LGD2), but its loss-given-default rate was changed to 18% from 20%.

The change in outlook to positive reflects Moody's view that the recent improvements in leverage and coverage realized since Dec. 31, 2005 could be sustained in the current range over the intermediate term and that Horizon will execute the upcoming redeployment of vessels and route changes with minimal disruption to service levels, which should support stability of earnings. The debt-to-EBITDA ratio is 4.4x.

The agency said the ratings reflect expectations of generally stable revenues over the intermediate term from broad-based demand for Horizon's containership services with the potential for a modest improvement in the operating margin from productivity gains. Horizon's substantial market share within each of its Jones Act trade lanes, its low revenue concentration, the oligopoly structure of the company's markets and high barriers to entry due to Jones Act protections.

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