Rating agency Crisil has revised its rating outlook on Great Offshore's long term loan to ‘negative' from ‘stable', due to the delay in taking delivery of its new jack-up rig.

However, the “A” rating of the Mumbai-based offshore service company has been reaffirmed.

According to Crisil, the revision in the outlook reflects delay in delivery of the new 350-foot jack-up rig for which the company had placed order with the Bharati Shipyard Ltd.

The rig which was to be delivered by December 2010, is expected to be delivered by December 2011.

The rating on the company's short-term facilities has been reaffirmed at ‘P1'.

Debt-funded fleet expansion plans

The revision also reflects expected deterioration in Great Offshore's debt protection metrics and capital structure, due to the company's large, debt-funded fleet expansion plans.

The company's earlier plan to fund its capital expenditure partly through equity has not materialised.

This will result in a significant portion of its committed capex now being funded through debt, Crisil said.

Further, delays in cash flows from new assets, which are presently under construction, will exert pressure on Great Offshore's debt protection metrics over the medium term.

The ratings continue to reflect Great Offshore's stable cash flows and high revenue visibility, owing to its strategy of contracting bulk of its assets on a long-term basis.

The ratings are also underpinned by the company's strong market position in the offshore oil field services business.

However, these rating strengths are partially offset by the company's ageing fleet, with high maintenance costs, and its moderate financial risk profile, marked by high-debt levels. The ratings may be downgraded if the delivery of the rig is delayed beyond December 2011 or Great Offshore's debt protection metrics decline beyond expectations.

Conversely, the outlook may be revised to ‘Stable' if the company increases its cash accruals and improves its capital structure, the Crisil report said.

Bharati Shipyard with 49 per cent equity is the single largest shareholder of Great Offshore