The dispute over the Costa contract now affects the company's track record at a stage when new orders are under negotiation. Successful conclusion of new contracts near term is critical for the company's cash flow. The downgrade reflects CLH's deteriorating financial and liquidity position in the absence of the expected significant cash payment by Costa Crociere at the end of April 2001. Moody's expects interest coverage for the fiscal year 2001 and 2002 to weaken significantly despite partial protection by bank guarantees and potential compensation payments. While CLH may begin legal actions against Costa Crociere, Moody's expects that such litigation may take considerable time. Moody's notes that for continued availability CLH will have to renegotiate terms and conditions of the GBP 50 million secured revolving credit facility by end of April 2001. In the past, the lender was supportive to CLH's strategy.