Moody's may downgrade Wan Hai

Moody's Investors Service said it placed under review for possible downgrade Taiwan-based Wan Hai Lines Ltd.'s Baa2 issuer rating and the Baa2 senior unsecured bond rating on the $325 million bonds issued by Wan Hai Lines (Singapore) Pte. Ltd., which is guaranteed by Wan Hai.

The review follows Wan Hai's announcement of half-year results for the period ended June 30. Moody's said the results reflect the challenging market conditions and the inability of Wan Hai to turn around its declining profitability. Furthermore, the agency said major improvement of the market conditions does not appear likely in the near future, and in the absence of an improved EBITDAR margin, the addition of new debt to finance the company's new vessels in 2007 and 2008 would further weaken its credit metrics.

Moody's review will cover Wan Hai's initiatives to improve its operating costs and reverse the decline in profitability and the company's plan for its future capital structure, including the level of secured debts, which may have notching implications for the outstanding bonds.

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