S&P rates Varel loans B

Standard & Poor's said it assigned its B- long-term corporate credit rating to Varel International Energy Services Inc. The outlook is stable.

The agency said it also assigned its B issue-level rating to Varel International Energy Funding Corp.'s planned senior secured credit facilities, which includes its $230 million term loan due 2017 and $20 million revolving credit facility due 2016. The recovery rating on the senior secured credit facilities is 2, which indicates expectations of substantial recovery in the event of a payment default.

Varel International Energy Funding Corp. is a special purpose entity formed for the purpose of putting in place senior secured credit facilities for the benefit of Varel International Energy Services Inc. and its other subsidiaries.

"The ratings on Varel reflect our assessment of the company's vulnerable business risk and highly leveraged financial risk," said S&P credit analyst Stephen Scovotti in a news release.

"The ratings also incorporate Varel's small size and scale in drill bit manufacturing, its competitive position against some of the largest oilfield services companies in the industry, a leveraged capital structure and cyclical end markets."

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