S&P upgrades Ulterra

Standard & Poor's said it raised the senior secured debt ratings on Ulterra Holdings Inc. to B from B-.

The agency also said it revised the recovery rating on these issues to 2, indicating 70% to 90% expected recovery in a default, from 3.

S&P also upgraded Ulterra Drilling Technologies LP's senior secured ratings to B from B- with its recovery rating revised to 2 from 3.

The upgrade reflects the decrease in secured debt and the resulting higher recovery prospects for senior secured lenders following its decision to downsize its senior secured credit facility to $92.5 million from the initially contemplated $105 million, S&P said.

The facility, which matures in 2016, consists of an $82.5 million term loan and a $10 million revolving credit facility, the agency said.

Ulterra has used the proceeds to pay down existing debt.

The ratings reflect Ulterra's small size and scale in drill bit manufacturing, competitive position against some of the largest oilfield services companies in the industry, a leveraged capital structure and cyclical end markets, S&P said.

The ratings also consider its adequate liquidity profile, variable cost structure and its specialization on polycrystalline diamond compact drill bits, which benefit from the increasing trend toward more complex horizontal wells, the agency said.

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