The Alaska native corporation that owns about a dozen government contractors in the Washington area has fallen on hard times, with weak performance forcing the company to rely on creditors to pay its bills, according to a credit rating agency.
Nana Development Corp., which manages about a dozen D.C.-area contractors that fall under its umbrella, including Akima LLC and Sava Solutions LLC in Herndon, saw its corporate credit rating from Moody’s Investor Service dip to “Caa” — deemed of poor standing and subject to very high credit risk.
The company, which reported $1.6 billion in revenue during fiscal 2013, has suffered from weak operating performance and cash flow generation, according to Moody’s, which announced the downgrade Thursday. Nana’s also relied on its asset-based revolver credit to fund $20 million in annual term loan amortization payments — something it will likely need to continue, given the lack of cash flow, according to Moody’s.
Lower-than-expected earnings within Nana’s oilfield and mining support segment, following its 2011 acquisition of Grand Isle Shipyard, didn’t help financials, Moody’s report said. That contributed to a $70 million impairment charge recorded in fiscal 2013.
One factor that Moody’s said contributed to Nana’s financial challenges is its statutory requirements as an Alaska native corporation. It’s among 12 such corporations established to foster economic development for Alaska natives, as part of the 1971 Alaska Native Claims Settlement Act championed by the late Sen. Ted Stevens, R-Ala. In exchange for getting an advantage in contracting competitions, Alaska native corporations are required to make dividend payments (dependent on a formula based on net income levels) that help support social needs of a native community in Alaska.
That said, reports indicate those dividends don’t always add up to a huge amount. One from the Government Accountability Office found that in 2010, Nana paid $21.71 million in dividends — or 53 percent of net income.