Moody's Investors Service downgraded the senior unsecured rating for bonds issued by MC Shipping Inc to Caa3 from B3. The downgrade reflects the company's deteriorating unencumbered asset base, high leverage, tight liquidity position, weaker operating performance and continuing difficult market situation. Moody's lowered the senior implied rating for the group to Caa2 from B2 and the issuer rating to Ca from Caa1. MC Shipping's unencumbered asset base is declining as a result of the age and declining revenues related to most of its vessels. Currently, MC Shipping operates 21 second-hand vessels (nine liquid petroleum gas carriers, eight container ships, and four multipurpose carriers), eight of which are intended for sale. In its results for the first nine months of fiscal year 2000 the company generated a marginal operating profit, but recognized the shrinking value of its fleet by an extraordinary write down of the book values and incurred losses on the disposal of vessels together resulting in a significant net loss. Moody's is concerned that any possible improvement in the trading conditions of MC Shipping may be insufficient to generate the free cash flows necessary for fleet renewal and debt service. The company's high leverage and tight liquidity are limiting its financial flexibility. MC Shipping Inc., a Liberian corporation, owns and operates a fleet of second-hand vessels. The company had sales of approximately $44 million for the nine months ended September 30, 2000 and recorded a net loss of approximately $26 million.