Moody’s downgrades SESI

Moody’s Investors Service said it downgraded SESI, LLC’s corporate family rating to B3 from B2, probability of default rating to B3-PD from B2-PD and senior unsecured notes to Caa1 from B3. The SGL-2 rating was unchanged. Moody’s also placed all SESI’s ratings under review for further downgrade.

These actions were prompted by SESI’s announcement on Dec. 18, it entered into an agreement to combine its U.S. land services business with Forbes Energy Services Ltd., which is unrated, and form a separate U.S.-focused public company (NewCo). Concurrently, SESI is looking to exchange up to $500 million of its December 2021 senior unsecured notes for longer maturity second-lien notes, as part of a broader restructuring and maturity management effort. Pursuant to the Forbes transaction, SESI plans to shift $250 million of the new second-lien debt to NewCo and keep the other $250 million of second-lien debt on its balance sheet.

If successful with the contemplated debt exchange and merger transaction, SESI will be left with roughly $1.05 billion of balance sheet debt, $240 million of cash, a majority equity interest in NewCo and a business focused on international and offshore markets. SESI expects these transactions to close in the first half of 2020.

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