Moody's Downgrades Pegasus Shipping

Moody's Investors Service downgraded from B3 to Ca the rating for the senior secured debt of Pegasus Shipping (Hellas) Ltd. The company's senior implied rating was downgraded from B3 to Ca, the issuer rating from Caa1 to C and the preferred stock rating from "caa" to "c." The downgrades reflect Moody's expectation that the pressure on freight rates will continue to build beyond the normal level of seasonality. The negative effect on the operating performance is further heightened by the default of the company's major customer which accounted for 20 percent of its revenues. The customer, Arne Blystad S/A, was unable to meet timecharter obligations. A settlement was reached in that in return for a one-time payment, Pegasus forgave a considerable amount of open receivables. The downgrade also considers the relatively old age of the fleet and the resulting weak debt protection, the further increase of the already aggressive leverage and the severe drain on liquidity as a result of the compounding operating problems. Moody's expects the depressed situation in the tanker business to continue to exert a lot of pressure on the economic viability of Pegasus Shipping (Hellas) Ltd. in the short/medium term. Consequently, there is a high probability of default regarding the ability to service debt, i.e. the punctual and full payment of interest. In addition, given accelerated deterioration of the combined financial and operating situation, a possible reorganization of the capital structure cannot be ruled out. Pegasus Shipping (Hellas) Ltd. (a Bermuda based company, operated out of Athens, Greece) is one of the world's largest independent owners of Panamax tankers. It currently owns and operates 14 Panamax tankers and transports crude oil and heavier petroleum products, primarily fuel oils and vacuum gas, along North and South American and Caribbean trade routes.