Fitch Ratings expects to assign the following rating to the proposed issuance of additional notes by --Up to
Additionally, Fitch Ratings has affirmed the rating assigned to the 2013-1 notes issued by OODF as follows:
Fitch's ratings address the likelihood of timely payment of interest on a quarterly basis and payment of principal considering the potential for two quarterly principal payment deferrals. The outstanding balance of the program, including series 2013-1 and 2014- 1 notes, as of the date of the second funding is expected to be
At closing of the series 2014-1 notes, the program will benefit from an additional collateral package, including a naval mortgage on the ultra deepwater (UDW) semi-submersible rig ODN Tay IV and a pledge of the shares of
The program will be backed by the flows related to the charter and services agreements signed with
This expected rating does not incorporate Fitch's full legal analysis as this process is currently ongoing and the final rating is contingent upon the receipt of final documents conforming to information already received.
KEY RATING DRIVERS
The 'BBB(EXP)'/Outlook Stable expected rating for series 2014-1 notes and the 'BBB'/Outlook Stable rating for series 2013-1 notes reflect the following key drivers:
Credit Quality of the Offtaker:
Conditionality and Revocability of the Charter Agreement: The services and charter agreements backing this transaction are joint and several and revocable under specific events. Extended periods of downtime or bankruptcy of the operator allow for cancellation of the agreements adding potential volatility to the cash flows.
Rechartering Risk: The existing charter and services agreements, for both Norbe VI and ODN Tay IV, expire before the maturity of the notes. This exposure is mitigated by: (i) current market day rate levels significantly above the current contract's day rate; (ii) market forecasts on the supply and demand fundamentals for UDW rigs; (iii) the Petrobras E&P plans and the challenges to delivery of the 28 drilling rigs scheduled for 2016-2020; and (iv) the liquidity mechanisms embedded in the transaction.
Credit quality of the operator: The operator's credit quality is considered, as the contracts have termination clauses related to the bankruptcy of the operator/sponsor and the operator's financial position might constrain its ability to operate the vessel through the life of the transaction. OOG is the largest Brazilian operator of UDW rigs chartered to
Positive Supply and Demand Fundamentals: The Federal Government of
Adequate Leverage and Refinance Risk: Fitch's adjusted valuation of the rigs indicates an initial loan to value (LTV) at the moment of the second issuance of 68.19 percent and a net LTV of approximately 64.64 percent. Debt service coverage ratios (DSCR) are expected to average 1.26x under Fitch's base case scenario. In order to mitigate refinancing risk, a dividend retention mechanism will begin 46 months prior to the expected maturity date. LTVs net of liquidity, rechartering and balloon payment reserve amounts is 19.32 percent, using Fitch's valuation approach. These metrics are in line with an investment grade rating according to Fitch's 'Criteria for Rating Oil-Vessel Backed Financing in
Diversified Portfolio: The multiple-asset nature of this transaction provides additional protection should a temporary problem occur with one vessel, as the other ones can continue generating cash flows to honor timely debt service payments. Additionally, this transaction incorporates mitigation mechanisms, including additional liquidity, and business-interruption insurance to mitigate the exposure to a single asset.
Guarantees in Place: The transaction benefits from a pledge of the shares of the companies that own the rigs and from mortgages on the individual rigs. Under certain events, the transaction may seize and dispose of the vessels to repay the outstanding balance of the notes. The transaction structure also allows for the substitution of OOG as operator of the vessel.
The ratings are sensitive to changes in the credit quality of
A detailed description of the criteria application will be provided in Fitch's presale report titled
Additional information is available at 'fitchratings.com'.
The information and documentation used to assess the rating was provided by Odebrecht Oleo e
--'Global Structured Finance Rating Criteria' (
--'Criteria for Rating Oil Vessel 'Backed Financing in
--'Odebrecht Offshore Drilling Finance Ltd.- Senior Debt, Series 2013-1' (
Global Structured Finance Rating Criteria
Criteria for Rating Oil Vessel-Backed Financing in
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Fitch Ratings expects to assign the following rating to the proposed issuance of additional notes by