S&P downgrades Fesco

S&P said it lowered the long-term corporate credit rating on Far-Eastern Shipping Co. plc (Fesco) to SD (selective default) from CC.

The agency also said it lowered the rating on the existing senior secured notes due in 2018 and 2020 to D from C.

S&P said it removed the corporate credit and issue ratings from CreditWatch, where they were placed with negative implications in May.

The downgrade follows Fesco’s decision not to make an interest payment due May 4 on its outstanding senior secured eurobonds within the 30-day grace period, which expired June 3, the agency explained.

Under S&P’s criteria, the agency said it considers Fesco’s missed interest payment to be a payment default.

At the same time, the company announced that it is in negotiations with its lenders, including the eurobond holders and holders of Russian ruble bonds as a part of a capital-structure optimization, S&P said.

While the company has made no formal final offer, the agency said some modifications to the original conditions are being discussed, including a deferral of an amortization payment due May 31 on the Russian ruble bonds.

The coupon on the Russian ruble bonds was paid June 6, S&P added.

The proposed changes are viewed as a distressed restructuring because of Fesco’s currently very fragile liquidity situation, among other things, and because the proposed amounts and conditions of payment are likely to differ from their original promise, the agency said.

The company still is current on its other obligations, such as financing leases, taxes and debt to suppliers, S&P added.

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