Moody’s downgrades Odebrecht Offshore

Moody’s Investors Service said it downgraded the Rule 144A and Regulation S senior secured global notes issued by Odebrecht Offshore Drilling Finance Ltd. to Caa1 from B2 and placed the notes on review for further downgrade.

The downgrades reflect news that Petroleo Brasileiro SA (Petrobras) terminated the charter agreement and the services agreement with ODN Tay IV, one of the four vessels that have been chartered to Petrobras under a transaction with Odebrecht Offshore, Moody’s said.

ODN Tay IV’s seven-year charter and services agreements had a scheduled expiration in 2020, the agency said.

This action followed a more than 60-day downtime period of ODN Tay IV, which was believed as the basis for termination of the charter agreement, Moody’s said.

Three other vessels in the transaction, ODN I,ODN II and Norbe VI, remain in operation and that the termination action by Petrobras relates only to the ODN Tay IV charter and services agreement, the agency said.

Given that ODN Tay IV accounted for about 28% of the total cash flows available for debt service, the termination of both the charter agreement and services agreement will have a material adverse effect on the results of the operations and financial condition of Odebrecht Offshore, therefore significantly affecting its ability to make scheduled debt-service payments on the notes, Moody’s said.

Petrobras is expected to aggressively seek to re-negotiate or terminate contracts for vessels that have any material operational weaknesses, the agency added.

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