TEXT-S&P lowers rating on Songa Offshore; on watch neg

Fri Dec 7, 2012 7:54am EST

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(The following statement was released by the rating agency)

Dec 07 -

Overview

-- Cyprus-based drilling company Songa Offshore SE (Songa) has faced a series of operating difficulties over the past few months that have led to operational and liquidity problems, resulting in our downward reassessment of the company's liquidity to "weak" from "less than adequate."

-- Songa's covenant headroom remains tight and we consider a covenant breach in the coming quarters as likely in the absence of corrective actions.

-- We are therefore lowering our long-term corporate credit rating on Songa by one notch to 'B-' from 'B', and keeping the rating on CreditWatch negative.

-- The ongoing CreditWatch placement reflects the possibility of us downgrading Songa if it cannot tackle its tight covenant headroom and successfully sell its Eclipse rig.

Rating Action

On Dec. 7, 2012, Standard & Poor's Ratings Services lowered its long-term corporate credit rating on Cyprus-domiciled drilling company Songa Offshore SE (Songa) to 'B-' from 'B'. We are keeping the rating on CreditWatch with negative implications, where it was initially placed on Nov. 6, 2012.

Rationale

The downgrade follows our decision to revise downward our assessment of Songa's liquidity position to "weak" from "less than adequate," and reflects what we perceive to be weak management and governance because of Songa's generally retroactive management approach. In addition, the downgrade reflects our view that, based on our revised forecast, the projected credit metrics for Songa are more commensurate with a 'B-' rating.

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