Fitch downgrades Seacor Holdings

December,15th 2015

Fitch Ratings has downgraded Seacor Holdings' long-term Issuer Default Rating (IDR) to 'B+' from 'BB-'. The Rating Outlook is 'Stable.'

The downgrade reflects Fitch's view that the combined effects of the weak oil price environment and downcycle in the offshore support vessel market have increased revenue and cash flow risk, which is anticipated to result in company leverage metrics exceeding Fitch's through-the-cycle levels over the rating horizon.

Fitch said it recognizes that the company's business line diversity and liquidity profile help to protect near-term credit quality and support the current Stable Outlook. However, Fitch believes that leverage metrics and financial flexibility could become further pressured over the medium-term.

Approximately US$791 million of senior unsecured debt, excluding the outstanding non-recourse SEA-Vista and other debt, is affected by the rating action.

Fitch said the ratings reflect the company's asset quality and favourable fleet renewal strategy, size, and diversity of vessel operations that support offshore drilling and transport commodities domestically, internationally, and along inland river systems, among other waterborne activities. These positives are offset by the continued softening offshore support vessel market environment (which historically contributed roughly 50 per cent of consolidated EBITDA), the influence a persistently weak commodity pricing environment will have on production-linked vessel activity, and continued shareholder friendly initiatives.

The company's weakening leverage metrics (Fitch calculated 5.3x latest 12 months LTM consolidated debt/EBITDA as of Sept. 30, 2015 compared to 3.9x for the same period in 2014) mainly reflects the softening conditions in its Offshore Marine Services segment.

Fitch's base case forecasts that Seacor's leverage profile will remain above 5.5x, excluding non-recourse SEA-Vista debt, over the next few years.

"Offshore rig demand will be softer over the medium term as exploration and production companies continue to focus on living within cashflows and, in some cases, preserving shareholder friendly activities," said Fitch. "The reduced offshore activity can be observed in Seacor's lower average utilization (65 per cent during the first nine months of 2015 versus 79 per cent for the same period in 2015) and day rates (US$13,708 versus US$15,202), excluding windfarm utility vessels.

Fitch believes that higher quality assets will be best positioned to find work during and after the cycle. Seacor's favourable fleet renewal strategy of continually building, trading, and upgrading vessels to maintain a young, high-grade fleet should position it well. However, Fitch anticipates that offshore rig demand could lag a recovery to supportive oil price levels (estimated at US$65- $70/barrel for deepwater) by at least 6-12 months.

Fitch said it currently views the offshore market inflection point to be late 2017/early 2018 with more robust offshore marine services results not likely to happen until after that point.

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