S&P downgrades Sea Containers

Standard & Poor's said it lowered Sea Containers Ltd.'s corporate credit rating to CCC- from CCC+, secured debt rating to CCC from B- and unsecured debt rating to CC from CCC-. All ratings remain on CreditWatch with negative implications, where they were placed on Aug. 25, 2005.

S&P said the downgrade follows the company's May 1 announcement that it is continuing to evaluate a range of strategic and financial alternatives, including the "appropriate level of debt capacity, with the intent to engage the public noteholders and other stakeholders." The agency said the announcement appears to imply that the company could approach noteholders with a proposal to restructure their debt.

Sea Containers expects its 2005 financial statements to include language "raising substantial doubt about the company's ability to continue as a going concern," the agency said. In the meantime, the company is continuing with the sale of its ferry assets.

The company had previously stated that its exit from the ferry operations will result in a non-cash, pretax impairment charge of about $500 million, which will reduce Sea Containers' net worth by about $475 million and result in non-compliance with certain net worth covenants in certain of its bank agreements. The company is currently in discussions with the bank lenders regarding covenant waivers or amendments. S&P said that if the company is unsuccessful with its restructuring plans, a Chapter 11 bankruptcy filing could result.

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