Transocean extends liquidity with cash tender offers

Transocean Ltd. (NYSE:RIG) announced a senior unsecured notes offering of $1.5 billion due 2023. The offshore contract drilling services provider expects to use the proceeds to repurchase $1 billion of existing notes maturing in 2020, 2021, and 2022.

Specifically, RIG is tendering to purchase its 6.500% Senior Notes due 2020, 6.375% Senior Notes due 2021, and 3.800% Senior Notes due 2022. The total consideration including early tender payment represents a discount of 5.5%, 10.0%, and 24.0% for the notes due in 2020, 2021, and 2022, respectively. Since March 1, 2016, Transocean has repurchased in the open market $228 million of debt securities for an aggregate cash payment of $189 million.

“We believe this is a prudent move that extends the liquidity runway for the company through a potentially protracted offshore drilling market downturn. We estimate that RIG will have liquidity of $3.9B at the end of 2017 (close to $4B-$5B guidance) and revolver draw of only $1B by the end of 2018), but its numerous maturities and capex commitments create a widening gap in 2019 when the $3B revolver matures and in 2020 when $1.9B of capex across seven deferred rigs come due. The company is better off without further large bullet payments in the 2020-2022 period,” Seaport Global Securities analysts said in a note Tuesday morning.

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