S&P Global Ratings affirmed its ‘CCC+’ issue-level ratings on Transocean Ltd.’s unsecured guaranteed debt and its ‘CCC’ issue-level ratings on the company’s senior unsecured debt and placed nearly all of the unsecured debt ratings on CreditWatch with negative implications following the company’s announcement of a comprehensive exchange offer that the rating agency views as distressed (Transocean’s unsecured notes due 2020 are not included in the exchange, thus it is not placing them on CreditWatch).
The company has offered to exchange up to $750 million in principal value of its senior unsecured guaranteed notes and senior unsecured notes maturing in 2021 or later with new 10% senior guaranteed notes due 2025 and new 11.5% senior guaranteed notes due 2027. The exchange consideration will be between $375 and $825 in new notes per $1,000 of existing principal, including a $50 early exchange premium, with accrued and unpaid interest to be paid in cash on the settlement date. The early exchange deadline is Aug. 21, 2020, and the final exchange deadline is Sept. 4, 2020. If completed, S&P would view these exchanges as distressed and akin to a default because the debtholders will receive less than they were originally promised under the securities, and the company is facing the risk of a conventional default over the next two years.
The terms of the offers are (in order of priority of acceptance, all for $1,000 principal of the existing notes, and all including a $50 early exchange premium):
— 6.375% senior notes due 2021 for $825 of 10% senior guaranteed notes due 2025;
— 3.8% senior notes due 2022 for $625 of 10% guaranteed notes due 2025;
— 7.25% senior notes with subsidiary guarantees due 2025 for $425 of 11.5% senior guaranteed notes due 2027;
— 7.5% senior notes with subsidiary guarantees due 2026 for $425 of 11.5% senior guaranteed notes due 2027;
— 8.0% senior notes with subsidiary guarantees due 2027 for $425 of 11.5% senior guaranteed notes due 2027;
— 8.0% debentures due 2027 for $375 of 11.5% senior guaranteed notes due 2027;
— 7.45% senior notes due 2027 for $375 of 11.5% senior guaranteed notes due 2027;
— 7.0% senior notes due 2028 (issued by Global Marine) for $375 of 11.5% senior guaranteed notes due 2027;
— 7.5% senior notes due 2031 for $375 of 11.5% senior guaranteed notes due 2027;
— 6.8% senior notes due 2038 for $375 of 11.5% senior guaranteed notes due 2027; and
— 7.35% senior notes due 2041 for $375 of 11.5% senior guaranteed notes due 2027.
“We intend to resolve the CreditWatch around the time of the final settlement date, which we expect will be in early September 2020, when we know exactly which issues are being exchanged. We will likely lower our issue-level rating on all of the notes that are exchanged according to the terms of the offer to ‘D’,” S&P said.
“Our issue-level rating on Transocean’s senior unsecured notes due 2020 and our ratings on all of its secured debt remain unchanged because they are not part of the exchange. Our ‘SD’ issuer credit rating on the company also remains unchanged,” the rating agency said.
Issuer Credit Rating SD/–/– SD/–/–
Ratings Affirmed; CreditWatch Action
Global Marine Inc.
Senior Unsecured CCC/Watch Neg CCC
Senior Unsecured CCC+/Watch Neg CCC+