S&P: FGH Outlook Remains Negative

Monday, June 12, 2000
Standard & Poor's affirmed its single-'B'-plus corporate credit rating and single-'B'-minus subordinated debt rating on Friede Goldman Halter Inc. (FGH). The outlook remains negative. The ratings affirmation follows FGH's announcement that it has signed a definitive agreement to sell its vessel repair unit to Bollinger Shipyards Inc. (unrated) for $80 million. Proceeds from the all-cash transaction, which is expected to be completed in July 2000, will initially be used to reduce debt. As a result, the transaction is expected to improve FGH's capital structure and liquidity, although the liquidity benefits of the transaction may be somewhat offset by a reduction in FGH's operating cash flow and committed bank credit lines. Nevertheless, available bank credit, expected collection of an additional $33 million in tax refunds, and future non-core asset sales should be sufficient for near-term debt service and working capital needs. The ratings for FGH reflect the company's participation in the intensely competitive and deeply cyclical shipyard and engineering services industries and aggressive debt leverage. FGH's yards and engineering divisions service drilling rigs and small marine craft used by commercial, government, and energy customers. Although the offshore oilfield services market is experiencing a nascent recovery following a very deep downturn in 1998 and 1999, margins for the shipyard industry likely will be slow to recover in the near term because of excess industry capacity. Declining activity is reflected in FGH's backlog, which totaled $543 million at March 31, 2000 versus $660 million (adjusted for subsequent asset sales) as of Dec. 31, 1999. Approximately 73% of FGH's 1999 year-end backlog is expected to be completed in 2000. Indicative of competitive pressures, the company's poor execution on awarded rig construction contracts, and the quality of the backlog, FGH's margins during the first quarter of 2000 fell to a dismal 3.2%. Improvement in margins is expected from lower general and administrative expenses, which is projected to be $60 million in 2000 versus about $86.2 million in 1999. Following the sale of the repair business, FGH will remain highly leveraged, with pro forma total debt to total book capitalization at March 31, 2000 of 49% and total debt to annualized earnings before interest, taxes, depreciation, and amortization (EBITDA) of about 4.6 times (x). EBITDA interest coverage is expected to remain thin, averaging near 1.5x. Capital spending and working capital needs are expected to outstrip cash flow over the near term. FGH currently is in compliance with all bank credit facility covenants, but continued poor financial performance could trigger violations over the intermediate term.
Maritime Reporter November 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Shipbuilding

Damen Outfitting First of Nine Bahamas Patrol Boats

The first of nine Damen Stan Patrol 3007s ordered by the Royal Bahamas Defense Force has arrived at Damen Shipyards Gorinchem in the Netherlands for outfitting.

Liquefaction Terminals to Dominate LNG Capital Expenditure

Capital expenditure (Capex) on global LNG facilities is expected to total $259 billion (bn) over the period 2015-2019, with investments expected to be 88% larger

New Chinese Shipyard Launches First Ship

The new shipyard facility of Honghua Offshore Oil & Gas Equipment Company in Jiangsu, China, has launched its first ship, an IMT982 Platform Supply Vessel. The vessel,

Ship Repair & Conversion

Keeping to the Schedule in the Pacific Northwest

When a tightly scheduled repower for the Kodiak-based trawler Sea Mac in early December took a very bad turn, Mike Fourtner used his 25 years of fishing experience

Optimarin ,Goltens Ink BWT Retrofit Agreement

Ballast Water Treatment (BWT) specialist Optimarin and Goltens, a provider of engineering and installation solutions for the shipping industry, have signed a nonexclusive

China's Scrap Yards Apply for EU Regulation

China's Zhoushan Changhong International Ship Recycling and Jiang Xiagang Changjiang Ship Recycling Yard, world’s two biggest ship scrap yards by capacity,  have

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Navigation Offshore Oil Pipelines Ship Electronics Ship Repair Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2228 sec (4 req/sec)