Floatel International has seen several of its ratings downgraded by Moody’s over concerns about weak liquidity.
The ratings agency has trimmed its corporate family rating (CFR) to Caa1 from B2 and probability of default rating (PDR) to Caa1-PD from B2-PD.
Moody’s has also downgraded the rating on the company's $650m senior secured term loan B due 2020 borrowed by Floatel to Caa1 from B2.
“The two notch downgrade of Floatel’s CFR to Caa1 reflects the company’s weak liquidity in the context of a challenging oil and gas environment, considering it still needs to obtain financing for the $270m delivery payment of the newbuild Floatel Triumph in April 2016," says Moody's.
The rating agency also expects that, following the recently announced delays of the 2016 contracts for the Floatel Superior and Triumph, the company might have tight financial covenants in 12-18 months if it cannot win any new contracts.
The Oaktree-Keppel joint venture has stated that it already has equity financing in place but even if this is the case Moody’s expects that it still requires financing of between $100-$150m.
“Whilst we acknowledge that the Triumph has a contract in place with Inpex Corp and $150m of financing would equate to significantly less than the 65% LTV achieved on the financing for the Floatel Endurance last year, we expect that it might still be difficult to complete considering the weak demand for and pricing pressure from oil and gas customers on Floatel’s services,” Moody’s said.
However, given that the Triumph is being built by one of Floatel’s major shareholder, Keppel Corp, Moody’s expects Floatel will have more flexibility in delaying the vessel than is the case in the offshore drilling industry.
Even if the vessel delivery can be addressed, Moody’s still expects the company might have tight financial covenants in 12-18 months.
Floatel owns five semi-submersible vessels with four are currently in operation and one is under construction, with delivery due in the second quarter of 2016.
