Transocean Downgraded to CCC- on Potential Restructuring

Offshore drilling company Transocean was downgraded to CCC- from CCC by S&P with a negative outlook as the rating agency sees the company likely going for a debt restructuring, a debt exchange, or another transaction due to unsustainable leverage. The potential transactions could be viewed as distressed. The company has $646mn debt maturities or amortizing in the next one year and $895mn in the following year. Transocean has capex payments of $420mn to be made by December 2002 for purchasing a new drillship and $440mn to be repaid in five years following delivery of the rigs. As of March 2022, the company had $911 million in unrestricted cash and a $1.3bn secured credit facility maturing in June 2023.  S&P notes a slower recovery in the drilling industry despite higher oil prices. As of April 2022, the company had a contract backlog of $6.1bn. S&P does not expect the company’s backlog to meaningfully increase by late 2023 and believes day-rates on its new contracts will likely be well below the average levels in 2018-2019, but higher than contracted rates in 2020-21.

Transocean’s dollar bonds were trading higher with its 11.5% 2027 up over 3 points to 92.88, yielding 13.65%.

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