Moody’s drops Transocean notes to Ba1

Moody's Investors Service said it downgraded Transocean Inc.'s senior note rating to Ba1 from Baa3 to reflect the company's large capital commitments and the expectation for a significant increase in leverage as the company enters what it believes could be a prolonged industry down-cycle.

The agency assigned a Ba1 corporate family rating and SGL-1 speculative grade liquidity rating. This action concludes the review that was initiated on Jan. 6.

"Transocean has been weakly positioned in its rating for the last few years as it focused on lingering issues related to Macondo, increased shareholder payouts, and pursued a strategy to revitalize its fleet," Moody's vice president and senior credit officer Stuart Miller said in a news release.

"While the company has made important strides to improve operational performance over the last two years, Moody's believes the rapid drop in oil prices in late 2014 and early 2015, combined with the company's large capital commitments for the construction of new drilling rigs, has significantly increased the credit risk to Transocean's bond holders and we expect leverage to increase materially through 2017 while the market for offshore drilling contractors deteriorates."

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