S&P downgrades Transocean

Standard & Poor's said it lowered the corporate credit ratings of Transocean Inc. and GlobalSantaFe Corp. to BBB+ from A- and placed both ratings on CreditWatch with negative implications following the announcement that the companies' boards of directors have unanimously approved a definitive merger agreement.

The agency said this transaction essentially constitutes a sizable recapitalization, with $15 billion in debt-financed cash distributions to be paid to Transocean and GlobalSantaFe shareholders, and pro forma the transactions, the combined entity will have $17 billion in total debt.

"The downgrades reflect the planned transaction's considerable debt component, which will noticeably weaken consolidated credit measures (we expect pro forma debt to upcycle EBITDA to exceed 3x at close), and indicate a clearly more aggressive posture by management toward rewarding its shareholders," S&P credit analyst Jeffrey Morrison said in an agency rating.

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