The rating on Wan Hai Lines Ltd. reflects the highly cyclical nature of the container shipping industry, the company's slightly weak credit metrics relative to the rating level, and its aggressive fleet expansion. Counterbalancing factors include Wan Hai's strong market position in intra-Asia container routes, the carrier's declining lease adjusted debt, and its adequate liquidity. We expect the current industry downturn, the deepest in the company's history, will keep Wan Hai's profitability and cash flow protection measures slightly weak for the rating over the next two to three quarters. We also believe that Wan Hai continues to face the material risk of prolonged weak credit metrics due to the industry's substantial overcapacity and uncertainty over when demand will recover. The
