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04 Feb 2011
$225 million senior unsecured PIK toggle notes rated Caa1
New York, February 04, 2011 -- Moody's Investors Service downgraded the Corporate Family Rating ("CFR")
of Commercial Barge Line Company ("CBLC" or the "Company")
to B2 from B1 and confirmed its other existing ratings assigned to CBLC:
B2 Probability of Default ("PDR"), SGL-2 Speculative
Grade Liquidity Rating and the B2 rating on the $200 million senior
secured second lien notes due 2017 ("2nd Lien Notes").
The outlook is stable. These actions resolve the review for downgrade
initiated upon the announcement on October 18, 2010 that its publicly-traded
parent, American Commercial Lines Inc. ("ACL")
agreed to be acquired by affiliates of Platinum Equity LLC ("Platinum").
The acquisition by Platinum was completed on December 21, 2010.
On February 3, 2011, ACL's new parent, ACL I Corporation
(formerly Finn Intermediate Holding Corporation) announced its intent
to issue $225 million of senior unsecured PIK toggle notes due
2016 ("Holdco Notes"). Moody's assigned a Caa1
rating to these Holdco Notes, the proceeds of which will be distributed
as a special dividend to the stockholders of ACL I Corporation,
which is ultimately owned by certain private investment funds controlled
..Issuer: Commercial Barge Line Company
....Corporate Family Rating, Downgraded
to B2 from B1
..Issuer: ACL I Corporation
....Senior Unsecured Regular Bond/Debenture
- Caa1, LGD5 - 89%
..Issuer: Commercial Barge Line Company
....Outlook, Changed To Stable From
Rating Under Review
..Issuer: Commercial Barge Line Company
....Probability of Default Rating -
....Senior Secured Regular Bond/Debenture
- B2 with LGD assessment changed to LGD4, 57% from
LGD4 - 53%
The confirmation of the B2 PDR reflects CBLC's favorable position
as the second largest independent inland barge transportation company
and the second largest manufacturer of U.S. Jones Act qualified
barges. Improving market fundamentals, management's
focus on controlling costs and the application of free cash flow to repayments
on the revolving credit had led to stronger credit metrics since June
30, 2010. Notwithstanding the increase in the family's
debt from the addition of the Holdco Notes, Moody's anticipates
stronger demand for barge freight in 2011, which should allow CBLC
to continue the improving operating margin trend it realized in 2010.
Lower investment in the barge fleet, continuing focus on enhancing
operational efficiency and increasing asset utilization should also support
profit margin expansion in upcoming periods. The downgrade of the
CFR by one notch reflects the reversion by Moody's to a 50%
Expected Family Recovery Rate because of the significant increase in debt
that the Holdco Notes add to the capital structure. The confirmation
of the B2 rating on the 2nd Lien Notes results from the application of
Moody's Loss Given Default Rating Methodology.
The SGL-2 Speculative Grade Liquidity Rating, which applies
to the liquidity profile of the operating company, CBLC, but
not that of ACL I Corporation reflects good liquidity and supports the
B2 family rating assigned to CBLC. The expectation of positive
free cash flow and at least $225 million of availability on the
$475 million revolving credit of CBLC due in 2015 (not rated) anchor
the liquidity assessment.
Moody's used its LGD methodology to assign the rating to the Holdco
Notes. The Caa1 rating reflects this instrument's lack of
upstream guarantees from the operating units. The dependence on
cash flows from the operating subsidiaries, such cash flows being
restricted by the revolving credit agreement and 2nd Lien Notes indenture,
significantly increases the credit risk of the Holdco Notes and results
in the Caa1 rating outcome.
The stable outlook reflects Moody's expectation that improving industry
fundamentals will allow CBLC to expand its earnings and cash flow to offset
potential pressure on the credit profile from the higher debt balance.
The outlook could be changed to positive if ACL is able to replace cyclical
earnings from the grain trade with less cyclical, higher margin
cargoes, such that it sustains a more predictable, higher
level of funds from operations from its barge business. Funds from
Operations (FFO) + Interest to Interest that is sustained above 3.0
times or Retained Cash Flow to Net Debt that approaches 17.5%
or Debt to EBITDA that is sustained below 4.5 times could positively
pressure the ratings. The outlook could be changed to negative
or the ratings downgraded if CBLC pursues an acquisitive growth strategy
that is primarily financed with debt. FFO + Interest to Interest
approaches 2.0 times, Retained Cash Flow to Net Debt of below
11% or Debt to EBITDA that is sustained above 5.5 times.
The last rating action on CBLC was the initiation of the review for possible
downgrade on October 19, 2010.
The principal methodologies used in rating were Global Shipping published
in December 2009, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
Commercial Barge Line Company, headquartered in Jeffersonville,
Indiana, is the sole first tier subsidiary of ACL also headquartered
in Jeffersonville, Indiana. ACL is one of the largest integrated
marine transportation and services companies in the United States,
providing barge transportation and related services, and construction
of barges, towboats and other vessels.
ACL I Corporation, headquartered in Beverly Hills, California,
is the direct parent of ACL and is ultimately controlled by certain private
investment funds controlled by Platinum.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Michael J. Mulvaney
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns rating to senior notes of ACL I Corporation, concludes review of Commercial Barge Line ratings; B2 CFR
250 Greenwich Street
New York, NY 10007
No Related Data.
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