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Moody’s lowers Ocean Rig, notes, loans
Moody's Investors Service said it downgraded Ocean Rig UDW Inc.'s corporate family rating to Caa2 from Caa1 and probability of default rating to Caa2-PD/LD from Caa1-PD.
The agency also downgraded the rating of Ocean Rig's unsecured notes to Ca from Caa3, as well as the rating on the senior secured term loan B at Drillships Ocean Ventures Inc., a subsidiary of Ocean Rig, to Caa2 from Caa1.
Concurrently, Moody's downgraded the rating on the senior secured term loan B1 borrowed by Drillships Financing Holding Inc. to Caa2 from Caa1 and the rating on the secured notes issued by Drill Rigs Holdings Inc. to Caa3 from Caa2; both are also subsidiaries of Ocean Rig.
The outlook on all ratings remains negative.
Ocean Rig has repurchased a principal amount of $268.1 million of the senior unsecured notes due in 2019 and $156.3 million of the senior secured notes due in 2017. The purchase prices were not disclosed but the resulting gain to the company of $173.5 million implies a material discount to par.
Moody's considers the transaction as a distressed exchange for the senior secured notes and the senior unsecured notes, which it views as a default. As noted, the agency appended the /LD indicator to the Caa2-PD probability of default rating to reflect the limited default; the /LD indicator will be removed after three business days.
Moody’s said the action reflects its view that the current leverage is high relative to current business conditions, with an untenable capital structure if current conditions persist, coupled with an expectation that the company could carry further debt buybacks at a discount to par which could again be classified as a distressed exchange.
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