Standard & Poor’s takes Horizon Lines off CreditWatch, lowers ratings

Standard & PoorÆs takes Horizon Lines off CreditWatch, lowers ratings    Standard & Poor's Ratings Services has assigned a 'B-plus' corporate credit rating to Horizon Lines Holding Corp. and lowered its ratings on a subsidiary, Horizon Lines LLC, to 'B-plus' from 'BB-minus.'
   At the same time, S & P's ratings services removed its ratings on Horizon Lines LLC from CreditWatch, where they had been placed on May 26.
   Horizon Lines is a U.S.-flag ocean carrier and technology company based in Charlotte, N.C.
   S & P's ratings services had placed Horizon's ratings on CreditWatch after learning that The Carlyle Group, a private equity firm in Washington, D.C., had agreed to sell its interest in Horizon Lines to Castle Harlan Inc., another private equity firm. The transaction will result in a new entity, Horizon Lines Holdings Corp., which will include Horizon Lines LLC as one of its subsidiaries.
   Standard & Poor's Ratings Services has also assigned its 'B-plus' rating to Horizon Lines's $25 million secured revolving credit facility, due in 2009; a 'B-plus' rating to the company's $250 million secured term loan, due in 2011, and a 'B-minus' rating to Horizon Lines' proposed $250-million senior unsecured notes, due in 2012.
   'The rating action reflects Horizon Lines's increased financial obligations and somewhat weakened financial profile after the acquisition by Castle Harlan,' said Kenneth L. Farer, a credit analyst for Standard & Poor's.
   'Pro forma, Horizon Lines has lease-adjusted debt of approximately $670 million, with debt to capital of 80 percent, compared with $406 million of lease-adjusted debt on March 31, 2004,' S & P's ratings services said in a statement.
   The ratings also reflect the company's 'high debt leverage, participation in the capital-intensive and competitive shipping industry, and an aging fleet. These risks are somewhat offset by the barriers to entry afforded by the Jones Act, which applies to intra-U.S. shipping, and the stable demand from the company's diverse customer base across its various markets,' S & P's ratings services noted.
   The ratings services explained that Horizon Lines Holding Corp. and Horizon Lines LLC are co-issuers and co-borrowers of the bank facility and notes offering. 'Proceeds from the bank facility and senior secured notes will be used to finance Castle Harlan's $650 million acquisition of the company from The Carlyle Group,' S & P's ratings services said.