Moody’s downgrades IG Seismic

Moody's Investors Service said it downgraded IG Seismic Services plc’s corporate family rating to Caa1 from B3 and probability of default rating to Caa3-PD from B3-PD.

The outlook also was revised to stable from negative.

The downgrades reflect the anticipated deterioration of the company’s operating and financial results in 2016 beyond previous expectations, Moody’s explained.

This is the result of suspension or cancelation of contracts already signed by a number of oil companies in the first quarter of 2016 amid oil price volatility and only a modest market recovery starting the second quarter of 2016 when oil prices somewhat stabilized, the agency said.

Moody's said it currently expects the company’s adjusted debt-to-EBITDA ratio to surge to nearly 8x in 2016 compared to 4.1x in 2015, which was driven by the negative operating cash flow under the significant drop in revenues, decrease in profitability and rising interest expenses.

Despite some level of revenue recovery expected in 2017, IG Seismic’s operations and financial metrics will likely remain weak with adjusted leverage staying at or higher than 6x, the agency said.

Moody’s also said it continues to see downside risks as the industry stays under pressure and the sustainability of the current oil price recovery remains uncertain.

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