Moody's may upgrade McDermott

Moody's Investors Service said it placed McDermott International, Inc.'s B1 corporate family rating, B1-PD probability of default rating and B2 senior secured note rating under review for upgrade.

The speculative grade liquidity rating also was changed to SGL-2 from SGL-3, reflecting the establishment of a revolving borrowing sublimit when the company amended its credit agreement in June 2017.

The agency also placed on upgrade review the B2 (LGD 4) rating on the company's $500 million senior secured second-lien notes.

The review is prompted by the agreement between McDermott and CB&I to combine in an all-stock transaction, Moody's explained.

The transaction has been approved by the boards of both companies and is expected to be completed in the second quarter of 2018, the agency said.

It remains subject to regulatory antitrust approvals, approval by McDermott's and CB&I's shareholders and other customary closing conditions, Moody's said.

The upgrade review reflects the anticipated improvements to the credit profile of the company after the transaction with CB&I, the agency said.

McDermott's credit metrics had become very strong for the B1 rating due to its recent positive operating performance and the pro forma metrics of the combined companies will be strong for the rating, as well, Moody's said.

The rating is constrained by its softening backlog of orders and the company's reliance on Saudi Aramco for the majority of its revenues and order backlog, the agency said.

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