Moody's Investors Service downgraded
to Ca from Caa2 the rating for the Euro 125 million senior notes of Cammell Laird Holdings plc
(CLH) following the company's announcement of a strategic review of its operations and financial structure which may lead to a restructuring of the notes. The following ratings were downgraded: CLH's senior implied rating to Caa2 from B3, the rating of a GBP 50 million secured revolving credit facility to Caa2 from B3, CLH's issuer rating to Ca from Caa2 and the bond rating to Ca from Caa2. The ratings remain under review for possible further downgrade.
The downgrade reflects Moody's concern that CLH's financial flexibility and liquidity position are further deteriorating following the termination of a high value contract by a key customer at the end of January. Moody's notes that interest payments under the notes due on April 15, 2001 are currently not assured. A possible restructuring of the bonds would likely involve losses for the noteholders.
Moody's acknowledges that CLH is in negotiations with the U.K. government regarding an aid and loan guarantee package to secure a $500 million contract for the construction of two cruise ships for Luxus Holdings.However, negotiations are taking longer than originally anticipated and may not be concluded in time to fund the interest payment. Moody's also notes that CLH still has to renegotiate terms and conditions of a GBP 50 million revolving credit facility.
The review focuses on the company's ability to reinstate financial flexibility through additional funding sources and the ongoing commitment of its bank lenders. It will also assess the implications for bondholders of the possible restructuring and with a view to the medium term CLH's ability to generate a stable flow of ongoing high volume orders once its current liquidity constraints are resolved.