S&P ups, rates Transocean notes B

S&P said it assigned B issue and 1 recovery ratings to Transocean Aquila Ltd.’s sale of $300 million of senior secured notes due 2028 and raised its ratings on parent Transocean Ltd.’s issuer rating to CCC+ from CCC. The agency also upgraded the senior secured debt to B from B-, its super-priority guaranteed unsecured debt to B- from CCC+ (recovery rating: 2), its priority guaranteed unsecured debt to B- from CCC+ (recovery rating: 2), and its senior unsecured debt to CCC+ from CCC (recovery rating: 3).

“The upgrade reflects improved rig demand, higher day rates, and our view that there is reduced near-term risk of a distressed debt exchange or balance sheet restructuring.

“Over the past year, longer-cycle offshore activity has steadily recovered, serving as a tailwind for rig demand. Transocean's backlog increased about 30% to $9.2 billion and remains the highest of the rated peer group. The company has also secured several new contracts with favorable pricing. It plans to relocate harsh environment semisubmersible Transocean Equinox from the North Sea to Australia, including options to extend the contract out to 2027 at day rates exceeding $500,000,” S&P said in a statement.

The proceeds will be used primarily to fund the remaining $140 million purchase price of the new build drillship, Deepwater Aquila, with the balance used primarily to prepare the rig for its initial contract. The notes are secured by the Deepwater Aquila, which is expected to be delivered to the company early in the fourth quarter of 2023.

The outlook is stable.

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