Moody’s drops Pacific Drilling, loan, notes

Moody's Investors Service said it downgraded Pacific Drilling SA's corporate family rating to Caa3 from Caa2 and probability of default rating to Caa3-PD from Caa2-PD.

The agency also downgraded the company's senior secured term loan B and the 5 3/8% senior secured notes to Caa3 from Caa2, as well as Pacific Drilling V Ltd.'s 7¼% senior secured notes to Ca from Caa3.

The speculative grade liquidity rating was affirmed at SGL-4 and the outlook remains negative.

"PacDrilling's ratings downgrade reflects our extremely negative view of the offshore drilling sector with no near term signs of improvement. Depressed prices for the offshore drillships offers weak asset coverage for PacDrilling's overall debt. With no material signs of improving contract coverage or utilization for PacDrilling's drillships, cashflow through 2017 will be severely impacted resulting in an unsustainable capital structure," Moody's senior analyst Sreedhar Kona said in a news release.

"Although the company has a significant cash balance, there is substantial risk of covenant breach in early 2017, a view reflected in our negative outlook."

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