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S&P downgrades Transocean to CCC+, outlook negative

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S&P downgrades Transocean to CCC+, outlook negative

S&P Global Ratings downgraded its issuer credit rating on Switzerland-based offshore drilling contractor Transocean Ltd. to CCC+ from B- with a negative outlook, according to a Sept. 25 research update.

Ratings also downgraded the issue-level ratings of Transocean's senior secured debt to B from B+, its unsecured debt with subsidiary guarantees to B- from B and its senior unsecured debt with subsidiary guarantees to CCC+ from B-.

The downgrade reflects Ratings' view that the offshore drilling contractor's operating margins have weakened and will stay down for the next one to two years as offshore drilling rig utilization and day rates remain subdued.

The rating agency also lowered its EBITDA and cash flow estimates for Transocean leading to higher leverage over the next 24 months. Ratings also highlighted Transocean's significant capital expenditure requirements over the next two years along with the company's heavy debt amortization and maturity schedule.

The negative outlook reflects Transocean's currently unsustainable debt leverage and the potential for a downgrade if Ratings no longer expects margins to recover starting in 2021.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.