Credit Ratings from S&P

Transcription

1 Credit Ratings from S&P 2010 Marine Money Conference Philip Baggaley Managing Director Standard & Poor s Funmi Afonja Director Standard & Poor s November 9, 2010 Copyright 2010 Standard & Poor s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. All rights reserved.

2 Agenda The Rating Process Determining a Corporate Credit Rating Recovery Analytics Rated Shipping companies 2.

3 S&P s Analyst-Driven Rating Process Ratings request from issuer Initial evaluation Meeting with issuer management Appeal Notification to issuer Ratings committee review and vote Analysis Publication and dissemination of public rating opinions Surveillance of rated issuers and issues 3.

4 S&P s Risk Factors for Corporate Ratings Country risk Industry characteristics Company position Profitability, peer comparison Business risk Rating Accounting Governance, risk tolerance Financial policy Cash flow adequacy Capital structure Liquidity/short term factors Financial risk 4.

5 Business Risk / Financial Risk Matrix Financial Risk Business Risk Minimal Modest Intermediate Significant Aggressive Highly Leveraged Excellent AAA AA A A- BBB -- Strong AAA A A- BBB BB BB- Satisfactory A- BBB+ BBB BB+ BB- B+ Fair -- BBB- BB+ BB BB- B Weak BB BB- B+ B- Vulnerable B+ B CCC+ 5.

6 The Opinions Reflected by Standard & Poor s Ratings 'AAA' Extremely strong capacity to meet financial commitments Highest rating Investment Grade Speculative Grade 'AA' 'A' 'BBB' 'BBB-' 'BB+' 'BB' 'B' 'CCC' 'CC' 'C' 'D' Very strong capacity to meet financial commitments Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances Adequate capacity to meet financial commitments, but more subject to adverse economic conditions Considered lowest investment grade by market participants Considered highest speculative grade by market participants Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments Currently highly vulnerable A bankruptcy petition has been filed or similar action taken, but payments of financial commitments are continued Payment default on financial commitments Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. 6.

7 Recovery Analytics S&P recovery analytics has three basic components Determining the most likely path to default Valuing the company following default Distributing value to claimants that we identify, based on upon the relative priority of each claimant 7.

8 Discrete Asset Valuation We focus on discrete asset valuation methodology because: Earnings volatility renders discounted cash flow and enterprise value methodologies less reliable Debt is secured with identifiable assets There are reliable means of judging expected asset values (e.g. appraisals, market data) 8.

9 Recovery Ratings Scale Recovery rating Recovery description Recovery expectations (%) * Issue rating relative to issuer credit rating** Notching 1+ + Highest expectation, full recovery Very high recovery Notch Up 2 Substantial recovery Meaningful recovery Average recovery No Notching 5 Modest recovery Negligible recovery Notch Down For issuers with a non-investment-grade corporate credit rating * Recovery of principal plus accrued but unpaid interest at the time of default ** Number of notches the issue rating may be adjusted relative to the credit rating of the issuer (i.e. +3 could mean the issuer rating could be BBB+ if the issuer rating was BB+) 9.

10 Rated Shipping Companies Misc Bhd. A-/Negative/-- Tanker Matson Navigation Co. Inc. BBB+/Negative/-- Container Kawasaki Kisen Kaisha Ltd. Stena AB BBB-/Negative/-- BB+/Stable/-- Drybulk Car Carrier Tanker Ferry Wan Hai Lines Ltd. BB+/Stable/-- Container BW Group Ltd. BB+/Negative Tanker Teekay Corp. BB/Stable/-- Tanker Ship Finance International BB/Stable/-- Lessor Navios Maritime Holdings Inc. BB-/Stable/-- Dry Bulk Overseas Shipholding Group Inc. BB-/Stable/-- Tanker First Ship Lease Trust Ltd. BB-/Stable/-- Lessor Ratings as of Nov. 5,

11 Rated Shipping Companies, Continued Navios Maritime Acquisition Corp. B/Stable/-- Tanker Marquette Transportation Company Holdings, LLC B/Stable/-- Towboats Barge United Maritime Group, LLC B/Stable/-- Barge American Commercial Lines Inc. B/CreditWatchDev./-- Barge American Petroleum Tankers B-/Stable/-- Tanker Ultrapetrol B-/Stable/-- Tanker/Barge Horizon Lines Inc. B/Negative/-- Container General Maritime Corp. B/Negative/-- Tanker Trailer Bridge Inc. B-/Stable/-- Container PT Berlian Laju Tanker Tbk B-/CreditWatch/Neg-- Chemical Tanker PT Arpeni Pratama Ocean Link Tbk SD Barge/Bulk Carrier Ratings as of Nov. 5,

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