S&P downgrades Transocean

S&P said it lowered its corporate credit rating on Transocean Inc. to B from B+ and assigned a B+ issue-level rating to its proposed priority guaranteed notes due 2026. The recovery rating is 2, indicating expectations of substantial (70%-90%; rounded estimate: 85%) recovery in the event of default.

The agency also lowered the issue-level rating on the company's secured debt to BB- from BB. The recovery rating is 1, indicating expectations of very high (90%-100%; rounded estimate: 90% and 95%) recovery.

S&P also lowered the issue-level rating on the Transocean’s senior unsecured debt without subsidiary guarantees to B from BB-. The recovery rating was revised to 4 from 3, reflecting expectations of average (30%-50%; rounded estimate: 40%) recovery.

The agency lowered the issue-level rating on the company’s senior unsecured debt with subsidiary guarantees to B+ from BB-. The recovery rating is 2, reflecting expectations of substantial (70%-90%; rounded estimate: 85%) recovery.

In addition, S&P lowered the issue-level rating on subsidiary Global Marine Inc.'s senior unsecured debt to CCC+ from B-. The recovery rating is 6, reflecting an expectation of negligible (0%-10%; rounded estimate: 5%) recovery.

The outlook is negative.

“The downgrades reflect our view that demand for offshore contract drilling services will remain depressed through 2019 and that Transocean's costs will be higher than we previously assumed over the next two years, resulting in higher projected debt leverage,” the agency said in a news release.

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