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Transocean: downgraded to junk, tighter

26 February 2015 by pdonnat

Moody’s downgraded RIG ( Transocean LTD ) to Ba1 outlook stable. RIG will be out of the new series CDX.IG.NA Series 24 to be issued next month. Just a couple of hours later, RIG released its earnings for the fourth quarter which came better than the market consensus on aggressive costs cutting and slashing dividend . The junk status can be justified given the uncertainty on the oil industry but the CDS has tightened sharply by 50bps before closing 35 bps tighter. The CDS dynamic is a function of the fear and could trade back below 500bps if the company keeps adjusting its capacity and hoarding cash. This name is actively traded in CDS as 90MUSD have traded in average per day last week according to DTCC as you can see on the Grapple. That is 2.5% of the company public debt.