Moody's may upgrade Hercules Offshore

Moody's Investors Service said it placed Hercules Offshore, Inc.'s B2 corporate family rating, B3 probability-of-default rating and B2 (LGD3, 34%) revolver and term loan under review for possible upgrade following its announcement that it has entered into a definitive merger agreement to acquire Todco in a cash and stock transaction valued at $2.3 billion.

The agency said the review for possible upgrade is prompted by the improved business profile that will result from the transaction, including greater diversification and significantly increased size and scale, as well as moderate to low leverage on a pro forma basis and going forward.

In its review, Moody's will focus on Hercules Offshore's pro forma business profile, particularly the degree to which its increased size, scale and diversification can be expected to improve its financial performance under volatile industry conditions; the near- and intermediate-term outlook for shallow-water contract drilling; and the company's financial policies, capital spending plans and inclination to pursue further consolidation.

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