Fitch places Berlian Laju Tanker on watch negative

Fitch Ratings has today placed Indonesia-based PT Berlian Laju Tanker Tbk's long-term foreign and local currency Issuer Default Ratings (IDR) of B on Rating Watch Negative (RWN).
The announcement following the company's plans to acquire Camillo Eitzen & Co ASA (CECO), an Oslo-based financially distressed shipping company.
Fitch has also placed the 'CCC' rating of the US$400m senior unsecured notes due 2014 issued by BLT Finance B.V. and guaranteed by Berlian Laju on RWN.
CECO is a large ship operator involved in chemical, gas and bulk shipping. If the transaction goes through, the combined entity will become the world's largest chemical tanker operator.
The RWN reflects Fitch's concerns that the proposed acquisition may further weaken Berlian Laju already weak financial profile. CECO is already in the process of restructuring its debt (US$1.4bn at June 2009) following a decline in asset values and lower cash generation due to weak conditions in the shipping markets.
CECO's unadjusted leverage net of cash at H109 was 9.3x compared to Berlian Laju adjusted leverage net of cash of 6.7x. CECO's profitability is much weaker compared to Berlian Laju. In the six months ended 30 June 2009, CECO reported revenues and EBITDA of USD539 million and USD74.6 million respectively, compared to Berlian Laju US$305 million in revenue and US$ 127 million in EBITDA. Fitch also believes that the proposed acquisition demonstrates BLT management's high risk appetite.
However, Fitch notes that BLT plans to structure the transaction in a manner that will lower risks to the company. The plan includes an all-share offer for the shareholders of CECO (via mandatorily exchangeable bonds), raising an additional US$200million in equity at BLT, and further re-structuring of CECO's debt.
Nonetheless, financial performance of CECO can deteriorate further given the weak shipping markets and the company may require further support from its shareholders.
The transaction is subject to shareholder approval, Berlian Laju ability to raise USD200m via mandatorily exchangeable bonds, a due diligence on CECO by Berlian Laju , and agreements with CECO's lenders on the terms of restructuring CECO's debt to the satisfaction of the company.