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Rating Action:

Moody's downgrades Noble Holding International CFR to Caa1, stable outlook

28 Feb 2019

New York, February 28, 2019 -- Moody's Investors Service ("Moody's") downgraded Noble Holding International Limited's (Noble) Corporate Family Rating (CFR) to Caa1 from B3, its senior unsecured notes ratings to Caa2 from Caa1, and its senior guaranteed notes to B3 from B2. Noble's Speculative Grade Liquidity Rating was lowered to SGL-3 from SGL-2. The rating outlook was changed to stable from negative. Noble is an indirect wholly owned subsidiary of Noble Corporation plc, a publicly traded offshore drilling company.

"The downgrade of Noble reflects further declines in its cash flow for 2019 leading to negative free cash flow and diminishing, albeit still adequate liquidity," said Pete Speer, Moody's Senior Vice President. "While the company's earnings look likely to bottom this year and begin to improve in 2020, the pace of earnings improvement looks to be slow absent a much stronger recovery in dayrates than we anticipate."

Downgrades:

..Issuer: Noble Holding International Limited

.... Probability of Default Rating, Downgraded to Caa1-PD from B3-PD

.... Speculative Grade Liquidity Rating, Downgraded to SGL-3 from SGL-2

.... Corporate Family Rating, Downgraded to Caa1 from B3

....Gtd. Senior Unsecured Notes, Downgraded to B3(LGD3) from B2 (LGD3)

....Senior Unsecured Notes, Downgraded to Caa2 (LGD5) from Caa1 (LGD5)

Outlook Actions:

..Issuer: Noble Holding International Limited

....Outlook, Changed To Stable From Negative

RATINGS RATIONALE

Noble's Caa1 CFR reflects the company's very high debt levels, weak margins, cash flow that is insufficient to cover interest and rising negative free cash flow to fund necessary capital investment to maintain fleet competitiveness. Dayrates for jackup rigs are rising and dayrates for floating rigs have bottomed, with the company experiencing rising contracting success and fleet utilization. However, these underlying improvements in business fundamentals are being more than offset in 2019 by the expiration of a very high dayrate contract on a single deepwater drillship and current market dayrates for floating rigs that yield narrow margins. The Caa1 rating is supported by Noble's adequate liquidity and manageable debt maturities through 2022.

Noble's SGL-3 rating reflects the company's adequate liquidity through mid-2020. At December 31, 2018, the company had $375 million of cash and its combined $1.8 billion of unsecured revolving credit facilities were undrawn. The company's primary credit facility is $1.5 billion and matures in January 2023, while the other $300 million credit facility matures in January 2020. The $1.5 billion revolver has a minimum liquidity covenant of $300 million (cash and available borrowing capacity under revolver), maximum consolidated indebtedness to total capitalization of 55%, minimum rig value to total revolver commitments and other loan parties debt of 3x, and minimum value of rigs wholly owned by the subsidiary guarantors to total rig value of 80% (as defined in the agreement). Moody's expects that the company will maintain adequate headroom for future compliance with these covenants into 2020, however, the debt to total capitalization covenant will effectively limit the company's access to its revolver to less than the committed amount.

Moody's expects Noble to generate significant negative free cash flow in 2019, based on its limited operating cash flow and planned cash capital spending of $250 million. The company has about $66 million and $96 million of senior notes maturing in 2019 and 2020. Noble's cash balance and effective borrowing capacity on its revolver provide adequate liquidity for these requirements, other working capital needs and its announced tender offer for senior notes with an aggregate maximum purchase price of $400 million that is expected to conclude in March 2019.

The outlook is stable based on the Noble's adequate liquidity and Moody's expectation that cash flow will rise in 2020 as dayrates and utilization continue to improve, although the pace of improvement will be slow. The ratings could be downgraded if liquidity becomes weak, if improving fundamental trends in the business reverse or if the company incurs a material adverse loss related to the ongoing Paragon Offshore litigation. In order to consider a ratings upgrade, Noble will have to achieve substantial increases in EBITDA in an improving offshore drilling market such that it can generate positive free cash flow with interest coverage (EBITDA/Interest) exceeding 1.5x with increasing amounts of available liquidity.

Noble's senior notes are rated Caa2, or one notch beneath the Caa1 CFR in accordance with Moody's Loss Given Default Methodology. This is because the senior notes are structurally subordinated to the $1.5 billion revolving credit facility. The primary borrower under that credit facility is an intermediate holding company subsidiary of Noble that is structurally closer to the operating subsidiaries and benefits from operating subsidiary guarantees that provide the revolver with a structurally superior claim to the large majority of Noble's drilling rigs.

Noble's $750 million senior guaranteed notes due 2026 are rated B3, or one notch above the Caa1 CFR, reflecting these notes' structurally superior position in Noble's capital structure relative to the senior unsecured notes discussed above. These notes are senior unsecured but are guaranteed by intermediate holding company subsidiaries, effectively giving these notes a priority claim to the company's assets over Noble's other senior unsecured notes outstanding that do not have subsidiary guarantees. However, these notes are structurally subordinated to the company's $1.5 billion revolving credit facility.

The principal methodology used in these ratings was Global Oilfield Services Industry Rating Methodology published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Noble Holding International Limited is a wholly owned subsidiary of Noble Corporation, a Cayman Island company (Noble-Cayman), which is a wholly owned subsidiary of Noble Corporation plc (Noble plc), a company incorporated under the laws of England and Wales, and a leading international offshore oil and gas drilling contractor. Noble Holding International Limited is the issuer of the of the company's rated debt, and therefore the CFR is assigned to that company. Noble Holding International Limited's senior notes are fully and unconditionally guaranteed by Noble-Cayman.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Peter Speer
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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