Pratibha Shipping Company downgraded to 'Fitch BBB-(ind)'
Fitch Ratings has downgraded India-based Pratibha Shipping Company Limited's (Pratibha) National Long-Term rating to 'Fitch BBB-(ind)' from 'Fitch BBB(ind)'. The Outlook is Stable. The agency has also downgraded Pratibha's INR2,742m long-term loans to 'Fitch BBB-(ind) from 'Fitch BBB(ind)', Reuters reports. The downgrade reflects Pratibha's deteriorating credit profile due to a steep fall in charter rates over 2010-2011, with its net financial leverage (adjusted net debt/operating EBITDA) increasing to 4.1x in FY11 (end-March) from 2.4x in FY10 and EBITDA gross interest coverage falling to 3.8x from 4.8x. Revenues declined by 35.2% yoy to INR1911.1m in FY11 with EBITDA margins falling to 40% from 44.1%. This is despite operating mostly in the coastal shipping routes for petroleum crude and products where Indian public sector units (PSUs) offer the first right of refusal to Indian shipping companies.
In FY11, PSU charterers negotiated lower rates in line with the decline in global charter rates. The same trend has continued in FY12, due to which EBITDA margins are likely to decline further to 36% to 37%. This may result in a further weakening of the credit metrics in FY12. Also, Pratibha will have to resort to additional borrowings in FY12 to meet its repayment obligations. However, refinancing risks are mitigated by the current absence of borrowings against three of its vessels.
Revenues in FY12, however, are likely to be maintained at around FY11 levels given the full year of operations of Pratibha Bheema, a recently acquired 154,571 dead weight tonnes vessel for which charter rates are much higher than for the company's other vessels. Pratibha Narmada, a bulk carrier owned by a subsidiary Pratibha Logistics Pvt Ltd, is also expected to become operational in Q4FY12.
The ratings are constrained by the high average age of the fleet which entails high operating costs, as well as by the dry docking in every two to three years. Four out of Pratibha's fleet of nine ships are older than 25 years. This would necessitate purchase of additional vessels in future and may constrain its financial leverage despite recovery in rates.
The ratings, however, continue to draw strength from the revenue assurance provided from Pratibha's seven out of nine vessels being on a time charter with PSUs such as Hindustan Petroleum Corporation Limited ('Fitch AAA(ind)'/Stable) and Indian Oil Corporation Limited ('Fitch AAA(ind)'/Stable). The ratings also reflect the company's ability to manage high utilisation rates for its entire fleet in a challenging industry environment.
Fitch has taken a consolidated view of Pratibha and its subsidiaries.
Negative rating action may result from lower profits due to suppressed charter rates, or higher debt levels due to capex causing net adjusted debt/EBITDA exceeding 5.5x on a sustained basis. Fitch will also monitor Pratibha's refinancing capability to meet its term debt repayments of around INR1.08bn and INR672m in FY12 and FY13, respectively.
Pratibha is a closely held public Ltd company, owned by the A.N. Pawar family. It has a fleet of eight tankers and one vessel in a subsidiary currently undergoing conversion to a bulk carrier.
In FY11, PSU charterers negotiated lower rates in line with the decline in global charter rates. The same trend has continued in FY12, due to which EBITDA margins are likely to decline further to 36% to 37%. This may result in a further weakening of the credit metrics in FY12. Also, Pratibha will have to resort to additional borrowings in FY12 to meet its repayment obligations. However, refinancing risks are mitigated by the current absence of borrowings against three of its vessels.
Revenues in FY12, however, are likely to be maintained at around FY11 levels given the full year of operations of Pratibha Bheema, a recently acquired 154,571 dead weight tonnes vessel for which charter rates are much higher than for the company's other vessels. Pratibha Narmada, a bulk carrier owned by a subsidiary Pratibha Logistics Pvt Ltd, is also expected to become operational in Q4FY12.
The ratings are constrained by the high average age of the fleet which entails high operating costs, as well as by the dry docking in every two to three years. Four out of Pratibha's fleet of nine ships are older than 25 years. This would necessitate purchase of additional vessels in future and may constrain its financial leverage despite recovery in rates.
The ratings, however, continue to draw strength from the revenue assurance provided from Pratibha's seven out of nine vessels being on a time charter with PSUs such as Hindustan Petroleum Corporation Limited ('Fitch AAA(ind)'/Stable) and Indian Oil Corporation Limited ('Fitch AAA(ind)'/Stable). The ratings also reflect the company's ability to manage high utilisation rates for its entire fleet in a challenging industry environment.
Fitch has taken a consolidated view of Pratibha and its subsidiaries.
Negative rating action may result from lower profits due to suppressed charter rates, or higher debt levels due to capex causing net adjusted debt/EBITDA exceeding 5.5x on a sustained basis. Fitch will also monitor Pratibha's refinancing capability to meet its term debt repayments of around INR1.08bn and INR672m in FY12 and FY13, respectively.
Pratibha is a closely held public Ltd company, owned by the A.N. Pawar family. It has a fleet of eight tankers and one vessel in a subsidiary currently undergoing conversion to a bulk carrier.
