Offshore Group Investment Limited -- Moody's changes Offshore Group's outlook to negative, rates new term loan and notes B3.
The B3 CFR reflects OGIL's very high financial leverage (proforma LTM Debt to EBITDA of approximately 12.5x at June 30, 2012), small scale within the offshore contract drilling industry, and limited operating history in an increasingly competitive global marine drilling market. The rating also considers the capital intensive and highly cyclical nature of offshore drilling activities, the short-term nature of jackup rig contracts, which limits revenue visibility, and the mobilization and contracting risks involving OGIL's third drillship (Tungsten Explorer). The rating is supported by OGIL's mostly new high quality assets, diversified geographic presence, and the company's short but good operating track record, which has facilitated strong utilization and better-than-average dayrates. The rating is also underpinned by the long term drilling contracts of the Platinum Explorer and Titanium Explorer drillships, and the robust industry fundamentals of the ultra-deepwater segment. Platinum Explorer has a five-year contract (roughly three years remaining) with Oil and Natural Gas Ltd. (Baa1 stable) of India and Titanium Explorer has an eight-year contract with Petrobras (A3 stable) of Brazil.
Its real. I read the report on Moodys. Interesting stuff. Key point is that the 500 million for Tungsten is assumed to be a term loan.
"The outlook could return to stable once Tungsten Explorer is successfully mobilized under a long term drilling contract and leverage is reduced below 8x on an LTM EBITDA basis.
For a rating upgrade, we would look for ongoing strong utilization rates for all rigs and leverage that appears poised to approach 5.0x."