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    S&P reacts to Ocean Rig's problems

    News // March 9, 2001
    Standard & Poor's (S&P) has revised its credit rating for Ocean Rig Norway's (ORN's) $125 million floating-rate senior-secured loans and $225 million fixed-rate senior-secured notes.S&P's downgrading of ORN's credit rating reflects the company's recent announcement that shipyard Friede Goldman Halter (FGH) does not intend to complete the new rigs it is building for ORN without a new agreement between the parties.

    In the absence of near-term completion prospects for the rigs, the company faces significant challenges and uncertainty as to an ultimate source of repayment on the bonds, says S&P.

    ORN still has no drilling contracts in place to provide ongoing operating cashflow.

    ORN is a Norwegian company and a wholly owned subsidiary of Ocean Rig ASA, a public joint stock company organised under the laws of Norway, formed in 1996 to construct, own, and operate a fleet of semi-submersible drilling rigs for offshore oil and gas exploration and development in deep water and harsh environments.

    S&P describes ORN as having "start-up company risk", and highlights the fact that it lacks a drilling contract, which exposes the company to uncertain day rates. It also has high break-even costs, says S&P.

    ORN is using the proceeds of the bonds to fund the costs of constructionof two, fifth-generation, dynamically positioned deepwater semi-submersibledrilling rigs (Bingo 9000 design), to pay interest on the notes through thedelivery date, and to fund the costs of construction of two more bare-deckhulls.

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