Bangkok--June 11--TRIS
Thai Rating and Information Services (TRIS) downgraded on
Wednesday, 11 June 1997 the rating of Precious Shipping PLC (PSL) from a
"BBB" to a "BBB-" rating. The downgrade reflects PSL's high debt
leverage, high risks from freight rate fluctuations and an extremely
competitive business environment. These are offset by its leading
competitive position and sound operating efficiency. Downside risk
protection offered by its parent company is a positive factor for PSL's
credit quality.
TRIS reported that PSL is the world's largest dry bulk, tramp
shipping company handling agricultural products, fertilizer, mineral ores
and general cargoes. The company operates in the
small handy-size sector with current total fleet size of 39 vessels and
total capacity of 783,256 dwt. The dry bulk shipping sector is cyclical,
unpredictable and extremely competitive as a result of high capital
intensity, the commodity nature of its service, and the imbalance of
supply and demand which causes freight rate fluctuations. However,
favorable world economic growth, especially in the Asia Pacific region,
its main area of operation, and likely reduction of the world fleet due to
aging , should help accommodate PSL's operation in this niche market.
PSL's business position is strong and its competitive edge comes
from a younger-than-average fleet age of 16.7 years and a proper
maintenance schedule resulting in high fleet utilization and comparatively
low insurance premiums. Its extensive international network provides
timely business information while broadening its charter opportunities. As
a member of G. Premjee Group (GPG), a trading conglomerate with a trading
volume of about 6 million tons in 1996, PSL is equipped with timely
commodities trading figures which enable the company to be logistically
effective. Moreover, downtime is implicitly underwritten by its parent
group when needed. To further strengthen its position, PSL plans to
acquire new and second-hand vessels, increasing its fleet size to 58
vessels by 1999. PSL has diversified into port infrastructure development
and harbor services in South and Southeast Asia, mainly through joint
ventures. Still, business synergy as well as the impact of competition on
its joint ventures have yet to be assessed.
In the future, funds from operation will not fully cover internal
needs. Thus, new fleet additions will add substantial leveraging of the
balance sheet to continue growth. Total debt as a percentage of
capitalization will remain in the 70% range over the near term. TRIS is
concerned about the volatility of freight rates which leads to high
operating risks. PSL has long-term charters but they have been minimized,
leaving a smaller cashflow cushion to cover adverse freight rates. End.
Note: Precious Shipping PLC (PSL) TRIS's rating
Sr debt: Downgraded from BBB to BBB-
Thai Rating and Information Services (TRIS) downgraded on
Wednesday, 11 June 1997 the rating of Precious Shipping PLC (PSL) from a
"BBB" to a "BBB-" rating. The downgrade reflects PSL's high debt
leverage, high risks from freight rate fluctuations and an extremely
competitive business environment. These are offset by its leading
competitive position and sound operating efficiency. Downside risk
protection offered by its parent company is a positive factor for PSL's
credit quality.
TRIS reported that PSL is the world's largest dry bulk, tramp
shipping company handling agricultural products, fertilizer, mineral ores
and general cargoes. The company operates in the
small handy-size sector with current total fleet size of 39 vessels and
total capacity of 783,256 dwt. The dry bulk shipping sector is cyclical,
unpredictable and extremely competitive as a result of high capital
intensity, the commodity nature of its service, and the imbalance of
supply and demand which causes freight rate fluctuations. However,
favorable world economic growth, especially in the Asia Pacific region,
its main area of operation, and likely reduction of the world fleet due to
aging , should help accommodate PSL's operation in this niche market.
PSL's business position is strong and its competitive edge comes
from a younger-than-average fleet age of 16.7 years and a proper
maintenance schedule resulting in high fleet utilization and comparatively
low insurance premiums. Its extensive international network provides
timely business information while broadening its charter opportunities. As
a member of G. Premjee Group (GPG), a trading conglomerate with a trading
volume of about 6 million tons in 1996, PSL is equipped with timely
commodities trading figures which enable the company to be logistically
effective. Moreover, downtime is implicitly underwritten by its parent
group when needed. To further strengthen its position, PSL plans to
acquire new and second-hand vessels, increasing its fleet size to 58
vessels by 1999. PSL has diversified into port infrastructure development
and harbor services in South and Southeast Asia, mainly through joint
ventures. Still, business synergy as well as the impact of competition on
its joint ventures have yet to be assessed.
In the future, funds from operation will not fully cover internal
needs. Thus, new fleet additions will add substantial leveraging of the
balance sheet to continue growth. Total debt as a percentage of
capitalization will remain in the 70% range over the near term. TRIS is
concerned about the volatility of freight rates which leads to high
operating risks. PSL has long-term charters but they have been minimized,
leaving a smaller cashflow cushion to cover adverse freight rates. End.
Note: Precious Shipping PLC (PSL) TRIS's rating
Sr debt: Downgraded from BBB to BBB-