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Transocean: Fitch's New Rating Outlook Negative From Stable Spells A Dividend Cut - An Update

Transocean Ltd. (RIG)

This is an update to my preceding article on Transocean published on January 16, 2015.

Fitch yesterday revised Transocean's outlook to "negative" from "stable"; however, it affirmed the issuer default rating [IDR] at "BBB-."

It was a mixed signal that I interpret positively, which is showing the underlying strength of the Transocean business model and its fleet status. Fitch is not hiding what it would like to see implemented.

Transocean's ratings are supported by its market position as the largest global offshore driller, strong backlog ($21.8 billion as of Oct. 15, 2014, for 2015 and beyond), favorable rig fleet high-grading and margin improvement efforts, and heightened financial flexibility, including that afforded by cash-generating asset sales (dropdowns) to Transocean Partners LLC (RIGP) and potential downward adjustment of the dividend.

Transocean is still showing resilience, supported by a strong backlog of well over $20 billion, and a calm determination… Read More …