STANDARD & POOR's has downgraded the long-term corporate credit and senior debt rating of Japan's third largest carrier "K" Line to BB from BB+, reflecting the big losses expected at the end of its 2011 fiscal year on March 31.
"K" Line expects to make a net loss of JPY32 billion (US$411 million) in fiscal 2011. S&P also said "K" Line profits have been hit hard by falling freight rates, slack dry bulk market, a drop in Japanese car exports after the March earthquake and high bunker prices.
But the ratings agency gave a relatively positive view on "K" Line's longer-term business prospects, and said "K" Line's outlook is "stable" as its "financial performance will gradually recover in coming years".
The agency expected "K" Line's financial position will perk up after hitting a low in 2011. It said "K" Line's ratio of debt to capital would increase to 70 per cent in this fiscal year, but would improve as market sees recovery
It said "K" Line would benefit from the improving car-carrier market in which the carrier has a major share.
But today, the carrier faces a more urgent challenge to its container business, following the latest announcement of the G6 Alliance between the New World and Grand Alliances, reported Lloyd's List, as their members include Japanese carriers NYK and Mitsui OSK Lines.
The G6 Alliance aims to grasp the biggest share on the Asia-north Europe trades. And "K" Line, which belongs to the CKYH Alliance with partners Cosco, Yang Ming and Hanjin Shipping, has been under-performed in Asia-Europe trade.