Moody's downgrades Abbot Group

Moody's Investors Service said it downgraded to B3 from B2 the corporate family and probability-of-default ratings of Turbo Beta Ltd., the ultimate holding company for Abbot Group Ltd. The agency also downgraded immediate holding company Turbo Alpha Ltd.'s $1.63 billion senior facilities to B2 with an unchanged loss-given-default assessment of LGD3 (34%) from B1.

This concludes the review begun on March 16, and the outlook is negative.

The downgrades reflect Moody's view that, given the growing likelihood of a substantial and potentially prolonged downturn in demand for drilling and oilfield services, Abbot's cash flow generation in 2009 and possibly 2010 will likely be weaker than in 2008. As a result, Moody's believes Abbot will be unable to reduce its leverage over the short to medium term significantly below the 2008 level of about 6 times.

At their revised levels, the ratings assume that the group's capex- and cost-reduction measures, combined with the general resiliency of its drilling business stemming from medium-term contracts and exposure to less volatile international markets, will support mildly positive free cash flow generation over the coming financial year, the agency said.

The negative outlook reflects the likelihood that Abbot may breach its financial covenants by early 2010 in the absence of a material and prompt recovery in demand for drilling services, Moody's said.

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