Moody's downgrades Sea Containers to Ca

Moody's Investors Service said it downgraded Sea Containers Ltd.'s corporate family rating to Ca from Caa2 and issuer and senior unsecured debt ratings to Ca from Caa3. The agency said it plans to withdraw the ratings because Sea Containers and two of its subsidiaries filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code on Oct. 15

The downgrade reflects Moody's belief that holders of the unsecured notes are likely to recognize a meaningful loss upon the resolution of the bankruptcy proceedings. Holders of Sea Containers' $386 million unsecured notes and the company's pension trusts are expected to be the largest creditors. Sea Containers is a holding company and its operating subsidiaries were not included in the bankruptcy filing. The senior unsecured notes, however, do not benefit from upstream guarantees from the operating subsidiaries.

In Moody's view, the value of Sea Containers' 50% interest in GE SeaCo will be a primary contributor of value in any debt reorganization plan, although there is considerable uncertainty in value.

In addition to the senior unsecured notes, Sea Containers is liable for certain debt obligations of its operating subsidiaries, including $60 million of term loans secured by first-lien mortgages on ten vessels. Some of these vessels are trading, and others are laid up. While the collateral coverage on a loan-by-loan basis is not clear, Moody's said it does not anticipate significant residual claims.

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