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Rating Action:

Moody's downgrades General Maritime; PDR to B2, outlook stable

15 Jul 2010

$300 million unsecured notes downgraded to Caa1

New York, July 15, 2010 -- Moody's Investors Service lowered its Probability of Default ("PDR") and senior unsecured ratings of General Maritime Corporation ("GenMar"); Probability of Default to B2 from B1, senior unsecured to Caa1 from B3. Moody's also confirmed the B1 Corporate Family rating ("CFR") and the SGL-3 Speculative Grade Liquidity rating. The outlook is stable. This rating action concludes the review for downgrade initiated on June 10, 2010 upon GenMar's announcement that it reached an agreement with Metrostar Management Corporation ("Metrostar") to purchase seven tankers including five VLCCs ("Very Large Crude Carriers") for $620 million.

"We believe that the expansion of the fleet, including in the higher operating leverage, VLCC segment will strengthen GenMar's long-term business profile," said Moody's Shipping Analyst Jonathan Root. "However, the effects on credit metrics of our adopting a more conservative view of 2011 tanker rates versus nine months ago and the increased financial risk that accompanies the higher debt balance have caused us to conclude with the downgrade of the PDR."

The B2 PDR considers GenMar's demonstrated success in managing its tanker operations and vessel purchase and sale activities over the course of the shipping cycle. Sharp swings in freight rates can cause the credit metrics of GenMar to range between those of the low Ba and low single-B rating categories. The B2 PDR reflects Moody's view of increased freight rate risk because of weaker oil demand than that it contemplated six to nine months ago. We believe that this risk and the increased financial risk of the larger debt balance and debt service burden that accompanies the vessel acquisition will reduce the degree to which credit metrics strengthen during 2011, relative to our expectations prior to the announcement of the vessel acquisitions. We now anticipate 2011 credit metrics that are indicative of the mid-single B rating category. Nevertheless, Moody's believes that GenMar's stable base of mostly major oil company customers will provide a base level of funds from operations that adequately cushions its debt service obligations over time. The ratings continue to look beyond the relatively weak 2010 tanker rate environment, which will lead to credit metrics in the near term that are weak for the B2 rating category, but sets the trough from which we expect credit metrics to strengthen.

The confirmation of the B1 CFR results from Moody's using a 65% Expected Family Recovery Rate ("EFRR") when applying its Loss Given Default Rating Methodology ("LGD"), compared to the 50% standard EFRR it previously used. Moody's made this change because it believes that, with the addition of the Metrostar vessels partly funded with equity, the net asset value of the fleet now provides sufficient cushion to support a higher recovery rate. The downgrade of the senior unsecured rating results from the application of the LGD model; although the Loss Given Default assessment improves to LGD5-76 from LGD5-88, reflecting the improved recovery rate expectation.

The stable outlook anticipates that GenMar will maintain its position as a leading tanker owner and operator and that credit metrics will begin to strengthen during 2011 with modestly improving sector fundamentals. The outlook could be changed to positive or the ratings directly upgraded if GenMar is able to demonstrate the ability to de-lever such that Debt to EBITDA is sustained below 4.7 times, Funds from operations + Interest to Interest approaches 3.0 times or Retained Cash Flow to Net Debt approaches 13 percent. The outlook could be changed to negative or the ratings directly downgraded if Retained Cash Flow to Net Debt is sustained below 9%, if Funds from Operations + Interest to Interest is sustained below 2.0 times or if Debt to EBITDA remains above 6.0 times.

The confirmation of the SGL-3 rating indicates that Moody's expects GenMar to maintain adequate liquidity. The notes indenture requires the company to maintain at least $50 million of liquidity including unrestricted cash and availability under the revolving credit. The recent equity raise relieves near term pressure on compliance with the Total Leverage Covenant required by the various credit facilities. This covenant is measured on a net debt basis, and going forward, provides for the inclusion of pro forma EBITDA for the trailing 12 months of the earnings contribution of the acquired vessels.

GenMar continues to demonstrate its savviness as an asset player and Moody's believes that the company could continue to grow the fleet via additional acquisitions of vessels. The notes indenture includes an incurrence test of at least 2.25 times Consolidated EBITDA to Consolidated Interest Expense (as defined). We believe GenMar is likely to buy additional vessels and expect additional equity raises should these occur.

The principal methodology used in rating GenMar was Moody's Global Shipping Methodology, published in December 2009 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating GenMar can also be found in the Rating Methodologies sub-directory on Moody's website.

The last rating action on GenMar was the initiation of the review for downgrade of all ratings on June 10, 2010.

Downgrades:

..Issuer: General Maritime Corporation

....Probability of Default Rating, Downgraded to B2 from B1

....Senior Unsecured Regular Bond/Debenture, Downgraded to Caa1 from B3

Upgrades:

..Issuer: General Maritime Corporation

....Senior Unsecured Regular Bond/Debenture, Upgraded to LGD5, 76% from LGD5, 88%

Outlook Actions:

..Issuer: General Maritime Corporation

....Outlook, Changed To Stable From Rating Under Review

Confirmations:

..Issuer: General Maritime Corporation

....Speculative Grade Liquidity Rating, Confirmed at SGL-3

....Corporate Family Rating, Confirmed at B1

General Maritime Corporation, a Marshall Islands Corporation headquartered in New York, N.Y., is the holding company parent of three intermediate holding companies of GenMar's vessel-owning subsidiaries.

New York
Michael J. Mulvaney
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Jonathan Root
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades General Maritime; PDR to B2, outlook stable
No Related Data.
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