S&P lowers Shelf Drilling

S&P said it lowered the long-term corporate credit rating on Shelf Drilling Holdings Ltd. to SD (selective default) from CC.

The agency also said it lowered the rating on Shelf Drilling MidCo Ltd.’s $350 million term loan due 2018 to D from C.

S&P also said it lowered the rating on the $475 million senior secured notes to D from CCC and removed it from CreditWatch developing, where it was placed in October.

The agency also said it placed the CCC+ rating on Shelf’s $200 million revolving credit facility on CreditWatch with positive implications.

The downgrade follows news that Shelf Drilling Holdings completed the exchange of 93.6% of its $475 million outstanding senior secured notes for new notes due 2020.

The holders of the Shelf Drilling MidCo loan exchanged their debt for a combination of new notes due 2020 issued by Shelf Drilling Holdings and for a cash consideration, S&P said.

The shareholders acquired a portion of the Shelf Drilling MidCo loan and the transaction includes the conversion of this debt into preferred shares, the agency added.

Also as part of the transaction, Shelf Drilling Holdings will decrease the amount of the revolver to $160 million from $200 million and will extend the maturity to 2020, S&P said.

This restructuring is viewed by the agency as tantamount to default due to the very challenging market conditions in which the company operates, taking into account the sizable maturities due in 2018, the agency said.

Following the transaction, S&P said it expects the company’s gross adjusted debt will be about $860 million at the end of 2017, comprising $503 million new notes due 2020, $30 million of notes due 2018 and about $300 million of adjustment for the sale and lease back.

In the next several days, the agency said it expects to raise the long-term corporate credit rating on Shell Drilling Holdings to CCC+ or B- depending on how well the company withstands some of the uncertainty in the market.

© 2015 Prospect News.
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