Moody's drops Rowan view to negative

Moody's Investors Service said it changed Rowan Cos., Inc.'s outlook to negative in response to its announcement that it intends to acquire Skeie Drilling and Production ASA. The Baa3 senior unsecured rating was affirmed.

The negative outlook reflects the $530 million of secured debt Rowan plans to assume in conjunction with this acquisition. The agency said that having a large proportion of secured debt in the capital structure places the senior unsecured notes in a disadvantaged position and is not typical of an investment-grade profile.

However, financing plans have not been finalized, and management has stated that it intends to refinance that debt as soon as possible, Moody's said. If this assumed debt is either refinanced with senior unsecured debt or repaid in a reasonable timeframe, then notching of the senior notes could be avoided.

The Baa3 rating reflects the quality of Rowan's fleet and its position within the offshore drilling market as a leading provider of premium jack-up rig services, the agency said.

In Moody's view, the Baa3 rating is tempered by the company's still relatively smaller fleet size, its focus on the more volatile jack-up and the added volatility of the land rig and manufacturing businesses.

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