Moody’s downgrades Seadrill, loans

Moody's Investors Service said it downgraded Seadrill Partners LLC's (SDLP) corporate family rating to B2 from Ba3, probability of default rating to B2-PD from Ba3-PD, the rating on the $2.9 billion senior secured term loan due 2021 borrowed by Seadrill Operating LP and Seadrill Partners Finco LLC, subsidiaries of SDLP, to B2 from Ba3 and the rating on the $100 million first-out secured revolving credit facility due 2019 borrowed by Seadrill Operating LP, Seadrill Partners Finco LLC and Seadrill Capricorn Holdings LLC, also a subsidiary of SDLP, to Ba2 from Baa3.

The outlook is negative. This concludes the review that was initiated on Aug. 24.

"The downgrade of Seadrill Partners ratings by two notches reflects the deteriorating offshore drilling market sharply increasing the risk from the cross default with its parent, Seadrill Ltd. (SDRL unrated), which has a substantial funding requirement of over $4 billion through 2017 and Moody's expects is at risk of breaching covenants in 2017 if it is unable to significantly delay deliveries of its newbuild vessels currently under construction and win new drilling contracts," Douglas Crawford, Moody’s vice president and lead analyst for Seadrill, said in a news release.

"Moody's views SDRL's industry leading large young fleet and continued access to bank financing as favorable factors, but remains concerned that the weak offshore drilling environment increases the risk for SDRL to obtain financing for its extensive newbuild program or to reset its covenants again."

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