Ratings agency Moody's has downgraded Italian ferry operator Moby.
The corporate family rating has been downgraded to Ca from Caa3 due to a “negative outlook”.
Moby has “an unsustainable capital structure relative to its earnings potential,” Moody’s said.
It is faced with a high restructuring risk based on a depressed debt valuation and suffers from “weak liquidity” due to low profitability and increased capital spending, according to Moody's.
"The downgrade reflects the company's increased probability of default and the high likelihood of a potential debt restructuring in the near term", Moody's assistant vice president Guillaume Leglise said.
"Moby has a very limited liquidity cushion and a balance sheet restructuring involving losses for financial creditors looks increasingly likely in the short run," according to Leglise.
Vessel disposals needed
Without any major disposal of vessels, Moody's expects Moby's liquidity profile to deteriorate due to significant cash outflows in the next year.
This is linked to the scheduled repayment of €50m ($56m) in February 2020 due under the company's amortising bank loan.
Moody's believes that Moby will face a liquidity shortfall in the short run.
It has downgraded its probability of default rating (PDR) to Ca-PD from Caa3-PD.
Moody's believes there is “an increased likelihood that Moby will seek to restructure its balance sheet in a way that leads to losses for some of the company's senior financial creditors”.
Moby, which is controlled by Italian shipowner Vincenzo Onorato, is understood to be in discussions with senior lenders and bondholders to find a financial solution.
But that has not prevented Moody’s from downgrading the €300m worth of senior secured notes to Caa3 from Caa2.
Milan-based Moby and its subsidiary Tirrenia-CIN is mainly involved in ropax services between Italy and Sardinia.
It operates a fleet of 64 ships, of which 47 are ferries and 17 tugboats.
In 2018, the company recorded revenues of €584m and Ebitda of €47.5m.
