Fitch lowers Offshore Drilling

Fitch Ratings said it downgraded the long-term foreign- and local-currency issuer default ratings on Offshore Drilling Holding SA to CCC from B-.

The downgrades reflect the expected weakening of the company’s credit profile as a result of the temporary suspension of Bicentenario operations, Fitch said.

This increases the company’s re-contracting risk in general and specifically for this unit upon expiration on its currently suspended contract in June 2017, the agency said.

Fitch also said it does not expect Offshore Drilling to generate enough cash flow from operations to cover interest expenses while Bicentenario is suspended and not receiving payments. This was further exacerbated by the recent contract renegotiations for Centenario and La Muralla IV, resulting in lower day-rates, the agency said.

Fitch also said it believes that while the company’s liquidity position provides some near-term cushion, the high uncertainty surrounding the ability to secure a long-term contract for Bicentenario increases Offshore Drilling’s credit risk.

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