Moody’s: Five Brazilian drilling vessels to negative

Moody's Investors Service said it affirmed the Baa3 ratings and changed the outlook to negative from stable on the senior secured notes of: Lancer Finance Co. (SPV) Ltd.; Schahin II Finance Co. (SPV) Ltd.; Odebrecht Drilling Norbe VIII/IX Ltd.; Odebrecht Offshore Drilling Finance Ltd.; and QGOG Atlantic/Alaskan Rigs Ltd.

Moody’s said the negative outlooks reflect its evolving view that the continuously deteriorating credit ratings of the sole offtaker Petroleo Brasileiro SA (Petrobras; Baa2 negative), including the recent corruption allegations could pose significant pressure on Petrobras' liquidity and ability to fulfill its contractual obligations; furthermore, a negative outcome of these investigations poses a risk to the issuers' ability to continue to provide services to Petrobras, pursuant to their respective charter and services agreements.

The agency’s view also reflects the change in the economic fundamentals underlying the projects such as falling oil prices, which could dampen demand for drilling vessels on a worldwide basis, therefore impacting the ability to re-contract them in the extreme case that charter and services agreements are terminated prior to debt maturity. The decline of oil prices could also pressure asset values, an important security feature in these projects, Moody’s said.

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