S&P lowers McDermott, rates loan BB+, notes BB

Standard & Poor's said it lowered the corporate credit rating on McDermott International Inc. to BB- from BB.

The outlook is negative.

The agency also said it assigned a BB+ rating to the proposed $400 million senior secured LOC facility and $300 million senior secured first-lien term loan with a recovery rating of 1, indicating 90% to 100% expected default recovery.

S&P also said it assigned a BB rating to the proposed $500 million second-lien notes with a recovery rating of 2, indicating 70% to 90% expected default recovery.

The downgrade reflects a revision of the company's financial risk profile to aggressive from significant, the agency said.

The proposed transaction increases interest expense and debt balances, in part to prefund 2015 capital expenditures, sooner than previously expected, S&P said.

As a result of project execution challenges and outsized losses, the company has generated negative cash from operations over the last 12 months, the agency said.

The ratings also consider the inherent cyclicality of the E&C services sector and McDermott's niche service offerings in the competitive offshore oil and gas market, S&P said.

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