S&P assigns Noble B+, notes BB-

S&P said it assigned a B+ issuer rating to Noble Corp. plc and BB- and 2 recovery ratings to its planned $600 million of senior unsecured notes to be issued by subsidiary Noble Finance II LLC. The 2 rating indicates substantial (70%-90%; rounded estimate: 85%) recovery of principal in default. Noble also plans to enter a five-year senior secured revolver. The outlook is positive.

“Our B+ rating reflects Noble's high-quality and young fleet, strong customer base, broad geographic diversity, and sizeable contract backlog. However, the company has a relatively small total fleet, exposure to recontracting risks over the next 12-18 months, high customer concentration, integration risks, and participation in the cyclical and volatile offshore oil and gas sector. All these factors partially offset our rating,” S&P said in a press release.

Noble plans to use the notes to repay its $350 million term loan and $173.7 million second-lien notes, with the remainder used for fees and general corporate purposes.

The outlook reflects the company’s robust financial measures and improving industry fundamentals, which is expected to enable the company to reprice its rigs at higher day rates as contracts roll off. “It also reflects our expectation it will successfully integrate the rigs acquired from Maersk Drilling. We anticipate funds from operations (FFO) to debt of around 80%-90% over the next 12-24 months, with debt to EBITDA below 1.5x,” S&P said.

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