SAO PAULO--(BUSINESS WIRE)--Fitch Ratings has affirmed the expected rating assigned to the proposed issuance of notes by Odebrecht Offshore Drilling Finance Ltd. following a revised offering circular as follows:
--Up to USD1,710,000,000 series 2013-1 senior secured notes, 'BBB(EXP)'; Outlook Stable.
On May 24, 2013, Fitch assigned the 'BBB(EXP)'/Stable rating to the proposed issuance of notes in an amount up to USD1,880,000,000.
The notes are backed by the flows related to the charter and services agreements signed with Petroleo Brasileiro S.A. (Petrobras) for the use of the dynamically positioned ultra deepwater (UDW) drillships called 'ODN I' and 'ODN II' for the term of 10 years and the UDW semi-submersible called Norbe VI, for the term of seven years. Odebrecht Oleo e Gas S.A. (OOG), oil and gas arm of Brazilian-based Odebrecht Group (Odebrecht), is the operator of the drilling rigs and primary sponsor of the transaction. The proceeds of the issuance will be used in large part to refinance existing loans attached to these rigs with the remaining portion to be used for general corporate purposes.
HSBC International Trustee Limited, as indenture trustee and collateral agent on behalf of the noteholders, will be assigned a collateral package that includes a pledge of the shares of ODN I GmbH (owner of ODN I and ODN II) and ODN Six GmbH (owner of Norbe VI), as well as mortgages on the rigs.
KEY RATING DRIVERS
Fitch's affirmation of the 'BBB(EXP)'/Outlook Stable expected rating reflects the following:
Lower Overall Loan-to-Value Ratios: The decrease in overall debt, and consequently minimum debt service reserve requirements (measured as the following two quarterly principal and interest amortizations), have decreased net debt to levels to approximately 59% of the value of the rigs as per the income approach valuation of the independent appraisal report. Under the previous offering, net debt LTVs were approximately 64%.
Lower Net Balloon Amount at Expected Maturity: Net debt LTV ratios in October 2022 decreased by approximately 1%-2% compared to the previous offering.
Adequate Debt Service Coverage Ratios: Debt-service coverage ratios have decreased to 1.25x compared to 1.28x under the previous offering. Despite the decrease, these levels remain consistent with the 'BBB(EXP)' rating.
The key rating drivers are described in Fitch's May 24, 2013 press release and include: (i) overall positive industry dynamics; (ii) quality of OOG as sponsor and operator of the rigs; (iii) rechartering risk of Norbe VI; (iv) overall leverage; and (v) liquidity and structural features remain key to the 'BBB(EXP)' rating. A revised presale report, titled Odebrecht Offshore Drilling Finance Ltd.,' reflecting new issuance amounts, is available at 'www.fitchratings.com'.
RATING SENSITIVITIES
The expected rating is sensitive to changes in the credit quality of Petrobras, as offtaker to the charter and services agreements. The foreign currency IDR assigned to Petrobras acts as the implied cap to drilling rig transactions in which it acts as offtaker. In addition, the expected rating is sensitive to the operating performance of the rigs. Extended periods of downtime, which lead to the revision of Fitch's expected uptime assumption of 95%, would result in lower debt service coverage ratio (DSCR) expectations and potentially result in rating downgrades.
Additional information is available at 'www.fitchratings.com'.
The information and documentation used to assess the rating was provided by Odebrecht Oleo e Gas S.A., Itau BBA Securities Inc., IHS Inc., ABSG Consulting Inc., and Okeanos BV.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=797832
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.