S&P rates KCA Deutag notes CCC+, view positive

S&P said it revised the outlook on KCA Deutag Alpha Ltd. to positive from stable and affirmed its long-term corporate credit rating at CCC+.

The agency also affirmed the issue ratings on KCA Deutag’s $375 million notes due 2021, $375 million term loan B due 2020 and $500 million senior secured notes due 2018 at CCC+. The recovery rating on these instruments is unchanged at 3, reflecting an expectation of meaningful recovery (rounded estimate: 55%) in the event of a payment default.

At the same time, S&P assigned a CCC+ rating to the $525 million senior secured notes that the company intends to issue in the coming weeks. The recovery rating is 3, indicating an expectation for meaningful recovery (rounded estimate: 55%) in the event of a payment default.

After the notes are issued, the company will redeem the $500 million senior secured notes due 2018.

At the company's request, the agency withdrew the CCC+ rating on the $250 million revolving credit facilities maturing in 2019.

S&P said the outlook revision reflects KCA Deutag’s recent contract agreement extensions and somewhat improved oil price, which may support some improvement in the oil drilling market over the medium-term. This has led the agency to revise upwards the company's EBITDA for 2017 and 2018, compared to its previous base case from October 2016 when it lowered the credit rating to CCC+.

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