Moody's rates QGOG notes Baa3

Moody's Investors Service said it assigned a first-time Baa3 rating to the QGOG Atlantic/Alaskan Rigs Ltd. senior secured notes due July 2018.

The financing structure also contemplates the possibility of an extension of the final maturity for up to 12 months under certain circumstances. The notes will be issued in an amount of $700 million.

The outlook is stable.

The proceeds of the notes will be used to refinance the outstanding debt of the project companies, to pay transaction costs, with the balance to be used by Queiroz Galvão Oil and Gas Group for its corporate purposes.

The Baa3 rating in part reflects the reliance on Petrobras as the highly stable and predictable debt repayment revenue source and the use of two operating assets with consistently high historical uptime performance and recent upgrades, which are expected to help maintain a similar level of performance, the agency said.

The rating assignment also incorporates the debt structure, which is front loaded in order to pay a majority of debt while the two assets are under contract, as well as the cash trapping mechanism that will allow excess cash to be retained for the last two years of the project in order to pay the balloon amount at the end of the amortization period, the agency added.

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