Moody's downgrades KCA Deutag

Moody's Investors Service said it downgraded the corporate family rating of KCA Deutag Alpha Ltd. to Caa1 from B3 and probability of default rating to Caa1-PD from B3-PD.

Moody's also said it downgraded the rating on all of its rated senior secured debt instruments issued by KCA Deutag UK Finance plc to to Caa1 from B3.

The outlook is stable.

The downgrades reflect operational underperformance in 2018, weak liquidity with very tight leverage covenant compliance headroom under KCA Deutag's loan facilities and an assumption of only a gradual improvement of the company's operating profitability and cash flow generation over the next 12- to 18-months, Moody's said.

The company suffered from a rig move incident on one rig in Saudi Arabia in August 2018, which resulted in eight operating rigs being shut down for some part of the quarter, the agency explained.

There also was lower performance in the legacy KCA Deutag land drilling operations as a result of the rolling off of some higher margin contracts and the overall competitive pricing environment, the agency added.

But Moody's said it expects some improvement of KCA Deutag's operating performance in 2019, driven by the realization of higher merger synergies.

The ratings remain supported by the company's diversified operations, strong presence in key oil producing regions and solid contract backlog, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.