Transocean Inc.'s announced
merger
with competitor GlobalSanteFe Corp. Monday will shower its shareholders with
$15 billion in cash in a newly formed recapitalized company. For debt rating
agency Fitch Ratings, the cash distribution to shareholders is a move that
would hamper the company's credit quality. As a result, Fitch downgraded on
Monday Transocean ratings to BBB+ from A- and placed all ratings of the
Houston acquirer on rating watch negative. A placement on rating watch
negative means that when the deal closes Fitch could downgrade Transocean's
other ratings one notch. A downgrade costs a company more money because a
lower debt rating equals more risk to lenders. As for the oil drilling sector
in general, this deal may be the first of more to come. Houston research firm
Pickering Energy Partners Inc. points to consolidation candidates like Pride
International Inc. and SeaDrill Ltd., which could be scooped up by a Norwegian
company. —Gerald Magpily
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The Deal.com article
Tags:
Transocean, GlobalSanteFe,
off shore drilling
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This is an intersting take on the Transocean/GlobalSantaFe deal. I'm only hearing about how wonderful it is for Transocean from everywhere else. Another unique perspective I found found is from Newsvisual, that goes more into the board connections between the companies (http://www.newsvisual.com/newsvisual/2007/07/board-ties-join.html). Anyway, I would be curious to know what kind of long term impacts Fitch Ratings has on the company, especially considering how huge it will be as a result of this deal.