Moody’s cuts Hercules, notes to Caa2

Moody's Investors Service said it downgraded Hercules Offshore, Inc.'s corporate family rating to Caa2 from B2, probability of default rating to Caa2-PD from B2-PD and senior note rating to Caa2 from B3.

The agency also changed the speculative grade liquidity rating to SGL-4.

The outlook is negative.

"Hercules 4th quarter 2014 results show a clear decline in the earnings power for the company's fleet of rigs, and the recent cancellation of one of its rigs working in the Middle East raises concern that the company's financial position will become precarious as 2015 unfolds," Moody's vice president and senior credit officer Stuart Miller said in a news release.

"The company's substantial cash balance may not be sufficient to prevent financial distress in the next 12 to 18 months given the rapidly deteriorating jack-up rig market and Hercules leveraged balance sheet and aging fleet. The downgrade to Caa2 reflects Moody's view that Hercules may consider a distressed exchange, which Moody's views as a default."

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