Todd Considers Sale of Assets, Merger After Withdrawing Bid

Todd Shipyards said Thursday that its failure to get a contract to build a Navy destroyer may have a “material adverse effect” on the company and that it is considering selling assets, merging with another firm or renegotiating its debt.

Todd withdrew its $159-million bid Tuesday to construct a DDG-51 Arleigh Burke-class destroyer after lenders refused financing for the program’s start-up costs. The contract was then awarded to Ingalls Shipbuilding in Pascagoula, Miss., a division of Beverly Hills-based Litton Industries.

Standard & Poor’s Corp. said Thursday that it lowered the ratings on Todd’s $75 million in subordinated debt to CC from B- because of the company’s “dire liquidity situation.”

“Key to the viability of Todd’s core shipbuilding business had been its ability to win a part of the DDG-51 Navy destroyer construction program,” the New York debt-rating company said.

The possible sale of assets, merger or debt refinancing is “a laundry list of the things we’re looking at,” Todd spokesman Steve Stanford said. The Jersey City, N.J., company has not earmarked any assets, including its San Pedro shipyard, for sale, he said.

The San Pedro operation “is our best shipyard,” Stanford said. “We’re still bidding a lot of work out of there at this time.”

Todd also announced Thursday that it expects its auditors to qualify the financial statement for the year ended March 29. The company has said it expects a loss of more than $40 million for the year, although its ARO tools division was profitable.

Analyst John Simon of Seidler Amdec Securities in Los Angeles said that it is difficult to put a value on the company until the financial statement is released.

“I find it difficult to rationalize how you get a buyer” for the company or its assets, Simon said. “It’s not much of a going concern at this point.”