S&P Lowers Pegasus Rating

Standard & Poor's lowered its corporate credit rating on Pegasus Shipping (Hellas) Ltd. (Pegasus) to triple-'C'-minus from single-'B'-minus. At the same time, Standard & Poor's lowered its foreign currency senior secured debt rating to triple-'C'-minus from single-'B'-minus. All ratings are placed on CreditWatch with negative implications. The rating actions reflect Pegasus' rapidly diminishing financial flexibility owing to weak market conditions. Pegasus owns one of the world's largest independent Panamax tanker fleets. The Panamax tanker sector is currently experiencing weak market conditions, and the market is expected to remain weak in the short term. Arne Blystad S/A, Pegasus' largest customer, which at the end of last year accounted for about 20 percent of the company's revenues, has not been able to pay the time charter rates contracted for the chartered vessels. A settlement was reached in mid-1999 whereby the charter contracts were terminated, and a large portion of the remaining receivable was forgiven in return for a one-time payment. Pegasus' capital structure is very aggressive, with total debt of $214 million (treating $19 million in preferred shares as debt) at the end of June 1999. Pegasus is currently in negotiations with Chase Manhattan International Ltd. with respect to a Notice of Technical Default for alleged breach of the security cover requirements of loan facilities. The next semi-annual interest payment on the company's preferred ship mortgage notes due 2004 is due on Nov. 15, 1999. Pegasus reported a loss of $9.6 million in the first half of 1999, and the company is expected to report a loss for the third quarter.