Diamond Offshore Drilling Inc. Rating Raised To #A# From #A-# On Criteria Outlook Stable

Stocks and Financial Services Press Releases Wednesday December 18, 2013 09:05
NEW YORK--18 Dec--Standard & Poor's
  • Standard & Poor's Ratings Services published its revised corporate criteria on Nov. 19, 2013.
  • We are raising our corporate credit and unsecured debt ratings on Diamond Offshore Drilling Inc. to 'A' from 'A-' and removing them from CreditWatch, where we placed them with positive implications on Nov. 26, 2013, in conjunction with our criteria revision.
  • We assess Diamond Offshore, a majority owned subsidiary of Loews Corp., as a "moderately strategic" entity under our group rating methodology framework.
  • The stable outlook reflects our expectation that the ratings on Diamond are unlikely to change during the outlook period.

NEW YORK (Standard & Poor's) Dec. 17, 2013--Standard & Poor's Ratings Services said today it raised its corporate credit and unsecured debt ratings on Diamond Offshore to 'A' from 'A-'. We removed the ratings from CreditWatch, where we placed them with positive implications on Nov. 26, 2013. The outlook is stable.

The upgrade reflects the application of our group methodology criteria, in which we assess Diamond as a "moderately strategic'" entity. Diamond is 50.4% owned by Loews Corp. (A+/Stable/--). We consider Diamond as "moderately strategic" to Loews because we believe that the company is important to the group's long-term strategy and has the long-term commitment of senior group management. We also believe that in periods of stress the group would provide support to Diamond if needed.

"The stable outlook reflects our expectation that Diamond's credit profile will continue to benefit from backlog-supported cash flow and low debt levels over the next 18-24 months," said Standard & Poor's credit analyst Susan Ding. "The current outlook also incorporates our expectation that management will manage capital spending and shareholder distributions such that it is able to maintain FFO to debt of at least 45% after the company has taken delivery of its current newbuilds."

Despite Diamond's relatively low debt leverage and strong revenue backlog, we view an upgrade as unlikely given our current view of Diamond's business risk profile compared with its peer group.

We would consider a downgrade in the event management deviates from its historically conservative practices and increases its debt leverage substantially to fund special dividends, newbuilds, or acquisitions such that FFO to debt declined to less than 45% for a prolonged period of time.

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