Osprey Maritime Rated BB, Stable Outlook by S&P.

MELBOURNE, Australia--(BUSINESS WIRE)--Standard & Poor's CreditWire 7/6/98--Standard & Poor's today assigned its double-`B' corporate credit rating to Osprey Maritime Ltd. (Osprey). The rating reflects benefits of a diversified fleet and a high proportion of revenues derived from time charters, offset by a large concentration of revenues on Indonesian contracts and a moderately aggressive capital structure. The rating outlook is stable.

Osprey's fleet consists of five liquefied natural gas (LNG) carriers, a share in an LNG carrier under construction, 10 crude oil carriers, and 15 product tankers. The shipping industry's risk profile is characterized as speculative grade as a result of volatile price swings. Although the segments Osprey operates in are cyclical, their risk profiles differ significantly. Vessel composition across different sectors of the liquid bulk shipping markets gives flexibility and less exposure to single-market fluctuations, while the large size of its high-quality fleet results in operating efficiencies.

About two-thirds of the fleet is on time charter, enabling the company to secure a future income stream and reduce exposure to freight-rate volatility. Osprey's strategy is to place all its LNG vessels on long-term contracts. However, two of its LNG carriers have charters expiring this year and no firm agreement has yet been signed. With LNG demand rising worldwide, and given limited available tonnage, the company is in a strategic position to meet market requirements for spot and short-term charters. A small proportion of its crude oil and product fleet will be placed out on the spot market for greater flexibility and to take advantage of rising spot rates. Likelihood of employment is high in view of an expected shortage of quality tonnage in the medium to long term.

Osprey is subject to earnings risk, as the company depends on a single client for a large portion of its revenues. The recent acquisitions of PetroBulk and Gotaas-Larsen, however, have expanded its customer base in Europe, the U.S., and the Middle-East, and Pertamina's proportional contributions toward future yearly revenues and profits are expected to fall. This risk is mitigated partially by a large portion of Pertamina revenues paid via offshore trustee accounts funded directly from LNG sales proceeds from KOGAS. This level will increase once the LNG new building commences its charter to deliver LNG to Chinese Petroleum Corp. under a similar payment structure. The Indonesian government recently announced that it will review contracts between Pertamina and Suharto-linked companies to ensure that contracts were awarded on fair grounds. Standard & Poor's believes that Osprey, which effectively is 20% owned by Bambang Trihatmodjo, may be forced to lower charter rates, even though the likelihood of contract termination is slim. Standard & Poor's will monitor this situation and adjust the rating accordingly.

Osprey's capital structure has been moderately aggressive following the acquisitions, with total debt-to-capitalization at 69%. Earnings before interest, taxes, depreciation, and amortization (EBITDA) coverage is about 2.3 times (x).

OUTLOOK: Stable. The stable rating outlook reflects the high proportion of time charters contributing to steady operating cash flows. Osprey's financial position is likely to strengthen in the coming years, with improved leverage and interest coverage as debt is reduced. Expectations of these improvements already are incorporated into the rating, Standard & Poor's said. ---CreditWire

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