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I AGREE
09 Mar 2018
New York, March 09, 2018 -- Moody's Investors Service, ("Moody's") assigned
first time ratings to Hornblower Sub, LLC, including a B2
Corporate Family Rating, B2-PD Probability of Default Rating,
and a B2 rating to the company's proposed senior secured bank facilities.
The rating outlook is stable.
"The B2 rating reflects the benefits of the company's exclusive
contracts with its ferry concessions and Moody's expectation that
the company's leverage will be modest at below 5.0x,"
state Pete Trombetta, Moody's Lodging and Cruise analyst.
"The rating is constrained by the potential to lose two important
concessions as the contracts expire in 2019," added Trombetta.
The company has entered into an agreement whereby Crestview Partners will
acquire a substantial ownership stake in Hornblower, with management
retaining the balance. The acquisition, along with fees and
expenses and some cash to the balance sheet, will be funded using
a proposed $330 million senior secured term loan and a combination
of new equity from Crestview and management rollover equity.
Assignments:
..Issuer: Hornblower Sub, LLC
.... Probability of Default Rating,
Assigned B2-PD
.... Corporate Family Rating, Assigned
B2
....Senior Secured Bank Credit Facilities,
Assigned B2 (LGD4)
Outlook Actions:
..Issuer: Hornblower Sub, LLC
....Outlook, Assigned Stable
RATINGS RATIONALE
The assignment of a B2 Corporate Family Rating reflects the exclusive
nature of Hornblower's contracts to operate ferry concessions at
two National Park Service locations (Alcatraz and Statue of Liberty/Ellis
Island) and the Canadian side of the Niagara Falls for the Canadian Parks
Commission. The company is also the exclusive operator of the NYC
Ferry system which serviced about 2.9 million passengers from May
2017 through December 2017. Additionally, the rating reflects
its modest leverage -- Moody's expects the company
will reduce 5.0x out of the box leverage to about 4.2x by
the end of 2018 (including Moody's standard adjustments) through
absolute debt reduction and earnings improvement.
The company's ratings are constrained by the fact that two of its
concession agreements, which have been previously extended,
are currently anticipated to expire in 2019 and there is some risk that
the company may not renew these concessions. The Alcatraz and Statue
of Liberty concessions are meaningful contributors to total EBITDA and
losing one or both of these could have a negative impact to the company's
earnings. Partially offsetting this concern is Moody's expectation
that as the incumbent operator, the company has insight in what
it takes to operate these concessions effectively, and will be competitive
in the bidding process. Also, if the company were to lose
one or both of the bids, there are other uses for the vessels,
including selling the vessels to a successor, using the vessels
for other concession operations, winning other bids on potential
new concessions, relocating vessels to other markets, or other
purposes.
Hornblower has good liquidity reflected by Moody's estimates that
the company's internal cash flow and cash balances will be sufficient
to cover its debt service, capex and mandatory debt amortization
needs over the next 12 months. The company is expected to have
a $60 million revolver in place with some borrowings expected to
cover seasonal needs. The revolver is expected to have a springing
coverage covenant which we do not expect to be tested over the next 12
months.
The B2 rating assigned to the senior secured debt -- the same as
the Corporate Family Rating -- reflects the fact that the entire
capital structure is made up of a single class of debt.
The stable rating outlook reflects Moody's view that over the next
12 to 18 months Hornblower will be able to maintain leverage of below
5.0x and EBITA/interest coverage of above 2.5x.
The ratings could be downgraded should leverage exceed 5.5x and
EBITA/interest expense remained below 2.0x. Ratings could
be upgraded should the company renew both the Alcatraz and Statue of Liberty/Ellis
Island concessions and maintain debt/EBITDA below 4.5 and EBITA/interest
expense above 3.0x.
Through its various subsidiaries Hornblower Holdco is a concessioner of
ferry transportation services to the National Park Service for Alcatraz
Island and the Statue of Liberty / Ellis Island and the Niagara Parks
Commission for the Canadian side of Niagara Falls, and is the exclusive
operator of the NYC Ferry system. The company also provides cruises
& events services in California and New York, operates overnight
cruises on the Mississippi River and in the Pacific Northwest, as
well as provides maritime operations and management services to public
and private clients. The company, which is headquartered
in San Francisco, California, generates about $500
million of annual gross net revenues and does not file public financials.
The principal methodology used in these ratings was Business and Consumer
Service Industry published in October 2016. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Peter Trombetta
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Janice Hofferber, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
No Related Data.
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