|
6 min read
|
30 Sep 2025
Moody's Ratings
New York, September 30, 2025 -- Moody's Ratings (Moody's) assigned a B3 rating to Transocean International Limited's (Transocean) proposed $500 million unsecured Senior Priority Guaranteed Notes (SPGNs) due 2032. Concurrently, we affirmed Transocean's B3 Corporate Family Rating (CFR), B3-PD Probability of Default Rating (PDR), and its various instrument ratings. The SGL-3 Speculative Grade Liquidity (SGL) rating is unchanged. The outlook remains stable.
Transocean will use the proceeds from the proposed notes, along with proceeds from its recent equity issuance and cash from its balance sheet, to repay some of its 2027 maturities as part of its ongoing maturity management and debt reduction efforts.
A full list of rating actions is provided at the end of this press release.
RATINGS RATIONALE
The proposed SPGNs are rated B3, in-line with Transocean's CFR. The rating benefits from a substantial cushion of Priority Guaranteed Notes (PGNs, rated Caa1) and senior unsecured notes (Caa2) that are subordinate to the SPGNs in Transocean's capital structure. However, the SPGNs are subordinate to the senior secured revolving credit facility (Ba3) and rig-backed secured notes (B1).
Transocean's B3 CFR reflects its high, albeit improving, debt leverage, which continues to be a drag on its free cash flow generation and valuation. Recent debt reduction, through a combination of proceeds from equity issuance and ongoing debt amortization, has aided the company's deleveraging efforts and should enable it to reduce debt/EBITDA to 5x including Moody's standard debt adjustments at year-end 2025. Transocean's credit metrics have shown steady improvement but remain weak, and the company remains highly reliant on a stable global offshore drilling market in order for its capital structure to become sustainable. The company's complicated capital structure and elevated debt levels leave open the risk for future transactions that could be considered distressed exchanges.
Despite improved leverage, near-term upward ratings momentum is tempered by an industry-wide slowdown in new contracting after several years of improving dayrates and increasing utilization. Transocean is well contracted through mid-2026; however, a large amount of uncontracted rigs – both among its competitors and at Transocean – will likely pressure dayrates on recontracting opportunities. While Transocean benefits from its large size, high fleet quality, and market-leading $7.2 billion revenue backlog as of July 16, 2025, revenue backlog has dropped from $9.3 billion at October 24, 2024 due to significantly diminished deepwater contracting activity.
We expect Transocean to maintain adequate liquidity as reflected by its SGL-3 rating. As of June 30, 2025, the company had $377 million of unrestricted cash on hand and liquidity is further supported by Transocean's currently undrawn $510 million revolving credit facility. The revolver expires in June 2028.
The credit agreement contains several financial covenants including minimum liquidity of $200 million, maximum debt to capitalization of 60%, minimum guarantee coverage ratio of 3.0x, and minimum collateral coverage ratio of 2.1x. The credit agreement has a springing maturity feature that is triggered if Transocean has at least $325 million of principal payments due within 91 days and is carrying less than $250 million of available cash. We expect that the company will remain in compliance with its covenant requirements.
Transocean will generate free cash flow in 2025, funding its capital spending and required debt amortization with cash from operations and cash on hand. Following the repayment of some of its 2027 maturities with proceeds from the proposed notes, Transocean will have about $1.02 billion of maturities and principal payments due through the end of 2027. We expect the company to be able to cover these obligations with internally generated cash flow.
The stable outlook reflects the likelihood Transocean will be able to meet expectations for moderate debt reduction through mid-2026, given its high percentage of contracted revenue.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
An upgrade of Transocean's ratings would require EBITDA/Interest coverage to approach 2.5x while undertaking sufficient recontracting to ensure leverage will remain below 6x in 2027. Ratings could be downgraded if the company's interest coverage falls below 1.5x, leverage rises above 7x, or liquidity weakens materially. Ratings could also be downgraded if Moody's view on the company's overall debt recovery or specific debt instrument recovery is reduced.
Transocean International Ltd. is a wholly-owned subsidiary of Transocean Ltd, the leading international offshore drilling contractor operating in deepwater, ultra-deepwater and harsh environment basins around the world.
LIST OF AFFECTED RATINGS
Issuer: Transocean International Limited
Assignment:
....Backed Senior Unsecured Regular Bond/Debenture, Assigned B3
Affirmations:
.... Corporate Family Rating, Affirmed at B3
.... Probability of Default Rating, Affirmed at B3-PD
....Senior Secured Bank Credit Facility, Affirmed at Ba3
....Backed Senior Secured Regular Bond/Debenture, Affirmed at B1
....Backed Senior Unsecured Regular Bond/Debenture, Affirmed at Caa1
....Senior Unsecured Regular Bond/Debenture, Affirmed at Caa2
Outlook Actions:
....Outlook, Remains Stable
..Issuer: Transocean Poseidon Limited
Affirmations:
....Backed Senior Secured Regular Bond/Debenture, Affirmed at B1
Outlook Actions:
....Outlook, Remains Stable
..Issuer: Transocean Titan Financing Limited
Affirmations:
....Backed Senior Secured Regular Bond/Debenture, Affirmed at B1
Outlook Actions:
....Outlook, Remains Stable
..Issuer: Transocean Aquila Limited
Affirmations:
....Backed Senior Secured Regular Bond/Debenture, Affirmed at B1
Outlook Actions:
....Outlook, Remains Stable
www.globenewswire.com
