S&P rates Diamond Offshore notes A-

Standard & Poor's said it affirmed its A- ratings on Diamond Offshore Drilling Inc. and assigned its A- rating to $250 million in 5.15% 10-year senior unsecured notes issued by Diamond.

Diamond has indicated that it will use the proceeds to refinance a portion of $478 million in zero-coupon convertible debt that is putable to the company in June 2005.

S&P said the ratings on Diamond reflect the risks associated with competing in the deeply cyclical and capital-intensive marine contract drilling industry, mitigated by a conservative financial profile.

Diamond's rating also reflects the unexpectedly poor performance of the company's midwater semisubmersible fleet during most of the past two years, despite very high oil and natural gas prices, S&P said.

For the trailing 12 months ending June 30, which was a period of difficult industry conditions, Diamond's EBITDA coverage of gross interest has averaged over 6x.

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