Noble Corporation Ordinary Shares (NYSE:NE) cash balance has received a major boost after the company’s wholly owned subsidiaries entered into agreements with certain lenders for a new credit facility. The agreements pave way for the company to gain access to a borrowing capacity of up to $1.5 billion. The Noble Corporation expects the deal to close before the end of the year.
The new credit facility will extend the current borrowing capacity that stands at $300 million. With a total borrowing capacity of $1.8 billion, the company should be able to finance all its operation until January 2022.
Under the terms of the agreement, the credit facility is to be guaranteed by certain rig-owning entities. However, commitments to the credit agreement are non-binding and subject to the finalization and execution of definitive agreements.
According to the Chief Financial Officer, Adam C. Peakes, the new credit facility underscores strong support from banking partners. The agreements are also indicative of Noble’s excellent operational, financial execution and strong contact coverage in the offshore environment.
“In addition to extending important financial flexibility for the Company, this new facility fortifies Noble’s excellent industry standing and positions us well for the industry recovery,” said Mr. Peakes.
Moody’s Downgrade
News of the new credit facility has however been overshadowed by reports that rating firm Moody’s has downgraded the offshore drilling contractor.
The firm has downgraded Noble’s Corporate Family rating to B3 from B2. The company’s unsecured notes have also been downgraded from B3 to B2. A B2 rating reflects the company’s deteriorating margins and cash flow in the offshore drilling business as well as high financial leverage.
According to the rating firm, the downgrade reflects Noble’s high debt levels that currently stand at $4 billion relative to its cash flow.
Overall, the outlook is negative given that sustained offshore drilling recovery could be several years away.
“The new revolver is a favorable development that extends the company’s liquidity runway and capacity to roll its debt maturities through January 2023, but the new revolver structurally subordinates Noble’s senior notes and that has caused the two-notch downgrade of the notes rating to Caa1,” said Pete Speer Moody’s Senior Vice president.
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