Not all Cuban cigars, top shelf booze and classy "escorts" for Shane Guidry afterall!

Moody’s only gave HGIM a B1 bond rating even with their big bucks Wall Street money wiz kids behind them.

[B]Harvey Gulf receives first public rating from Moody’s for new $1 billion credit facility[/B]
By WorkBoat Staff

Harvey Gulf International has received its first public rating from Moody’s for new $1 billion credit facility.

Shane Guidry, CEO of the New Orleans-based OSV operator, was pleased with the Moody’s rating. “The public rating will assist me in continuing to grow Harvey in order to meet our client’s demands while increasing our EBDITA to over $500 million in 2016, through additional newbuilds and acquisitions,” Guidry said in a statement.

Moody’s Investors Service assigned a first time corporate family rating (CFR) of B1 to Harvey Gulf and a B1 rating to the company’s proposed credit facility, which consists of a $250 million revolver and $750 million term loan. Proceeds from the financing transaction will be used to refinance $534 million of existing debt, acquire nine OSVs and fast service vessels from Gulf Offshore Logistics LLC (GOL) for $189 million, adjust for acquisition related excess working capital, and pay related fees and expenses. The company expects to close on two additional GOL vessels in the spring of 2014, for a total transaction valued at $268 million. The assigned first-time ratings are subject to Moody’s review of final terms and conditions of the transaction which is expected to close by mid-June. The rating outlook for Harvey Gulf is stable.

Moody’s said that Harvey’s B1 rating reflects the company’s modest size and primary geographic concentration in the Gulf of Mexico, its relatively short track record as a company with sizeable assets and fleet size, a customer concentration with its top three customers accounting for over 60% percent of total revenues, its exposure to crude oil and natural gas price cycles which drive the levels of offshore exploration and production (E&P) activity, and the low likelihood of debt reduction over the next 12-18 months given the expectation of increased capex from newbuilds.

At the same time, Moody’s said, the B1 rating also recognizes Harvey’s significant position as a provider of Jones Act OSV and ocean towing vessel services in the U.S. Gulf where activity is expected to remain robust at least through 2015. Moody’s also cited Harvey Gulf’s existing long-term charters for most of its fleet, the high quality of its vessels with an average OSV fleet age of four years, its good EBITDA margins, and its deepwater focus. Currently, strong industry fundamentals in its primary geographic market are likely to keep demand high for Harvey’s OSV services, and potentially allow for some margin expansion through day-rate increases as the contracts on vessels acquired from GOL are negotiated.

Harvey is expected to have an adequate liquidity profile with a modest cash balance and $250 million revolver availability at the close of the financing transaction. Moody’s expects the company to utilize at least half of its revolver over the nest 12-18 months to fund its newbuild program. Financial covenants under the credit facility are expected to be total leverage ratio of no greater than 5.75x through June 2015 with future step downs, and fixed charge coverage and asset coverage ratios of at least 1.10x and 1.15x, respectively. We expect Harvey to remain in compliance with the covenants at least through 2014. There are no debt maturities until June 2018 when the revolver matures. Since the almost all of the current and future fleet of vessels is expected to be pledged as collateral for the secured credit facility, Harvey would have limited alternative venues for asset sales as sources of backup liquidity, if needed.

Harvey’s stable outlook reflects Moody’s expectation that the company will maintain its EBITDA margins and good safety record, positive fundamentals in Gulf E&P activity will allow for absorption of additional servicing capacity expected to come online due to significant newbuild programs undertaken by Harvey’s competitors; and that the management will successfully handle any operational complexities arising from the material increase in its fleet size.

At this time, Moody’s said, a ratings upgrade is unlikely mainly because of the company’s limited scale and revenue concentration. However, an increase in geographic diversification and asset base, a larger worldwide market share, and Debt/EBITDA sustained below 3.5 could result in an upgrade. On the other hand, further increase in leverage, caused by either a severe market contraction or heavily debt funded growth in the fleet, with Debt/EBITDA sustained over 5 beyond 2013 could result in a downgrade.

Harvey Gulf provides vessel services to support offshore exploration and production efforts predominantly in the Gulf of Mexico. With the acquisition of nine vessels from Gulf Offshore Logistics, the company will have a fleet of 35 vessels (27 OSVs and eight OTVs) plus have nine vessels under construction and options to purchase two additional vessels from GOL when they deliver.

I really do feel quite bad for Shane…I mean he is such a “nice guy” and all… Guess he wasn’t able to buy-off Moody and Co. like he buys off the USCG?

btw, I honestly wonder if a Neanderthal like Guidry even knows what EBITDA stands for?

Nice when you get so many investors and financiers; they’ll be quick to suggest cutting wages at the first hint of a slowdown.