The corporate family rating (CFR) of Greece-based shipping company Eletson Holdings has been downgraded to B3 from B2, according to Moody’s ratings agency.

Moody’s also downgraded Eletson’s probability of default rating (PDR) to B3-PD from B2-PD and the rating on its USD 300 million first preferred ship mortgage notes due in 2022 to B3 from B2. The outlook on all ratings has changed to negative from stable.

“The downgrade reflects the deterioration in Eletson’s operating performance in light of weakening industry conditions in both of its operating segments: tankers and liquefied petroleum gas (LPG) and resulting increases in leverage and potential for liquidity pressures,” Maria Maslovsky, a Vice President-Senior Analyst at Moody’s and the lead analyst for Eletson, said.

Eletson’s revenue and EBITDA have declined to USD 289 million and USD 87 million, respectively, for the twelve months ending March 31, 2017, from USD 399 million and USD 172 million reported at the cyclical peak in 2015.

The deterioration was driven by the decline in time charter equivalent (TCE) rates which decreased by 32% year-over-year in the first quarter of 2017 following a 36% reduction in 2016.

With current spot rates suggesting minimal EBITDA in 2017, Moody’s does not anticipate a quick deleveraging for Eletson, although the agency is mindful of the highly cyclical nature of the shipping industry.

Moody’s expects the tanker market to be under pressure in the next twelve months owing to supply growth outpacing demand growth by close to an estimated 5%. As a result, the pressure on tanker rates are expected to continue.

The negative rating outlook reflects the potential for further operational deterioration stemming from end-market weakness, as well as related liquidity challenges.

Eletson owns and operates a double-hulled fleet of 22 product tankers and 12 LPG carriers as at March 31, 2017.