On October 11, 2016, Moody’s Investors Service downgraded Pacific Drilling S.A.’s (PacDrilling) corporate family rating to Caa3 from Caa2, its probability of default rating to Caa3-PD from Caa2-PD and its senior secured term loan B and the Company’s 5.375% senior secured notes to Caa3 from Caa2. “PacDrilling’s ratings downgrade reflects our extremely negative view of the offshore drilling sector with no near term signs of improvement. Depressed prices for the offshore drillships offers weak asset coverage for PacDrilling’s overall debt. With no material signs of improving contract coverage or utilization for PacDrilling’s drillships, cashflow through 2017 will be severely impacted resulting in an unsustainable capital structure,” said Sreedhar Kona, Moody’s Senior Analyst. “Although the company has a significant cash balance, there is substantial risk of covenant breach in early 2017, a view reflected in our negative outlook.” Read more on distressed companies.
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