ODHGPR 8⅜ 09/20/20

Offshore Drilling Holding SA

Credit, Industrial/Transportation


Publicly traded companies mentioned herein: Noble Corporation (NE), Offshore Drilling Holding SA (Private Co with Public Debt)

Highlights

The presenter is long Offshore Drilling Holding SA’s (“ODH”) 8⅜ bonds at ~40, and sees a favorable risk/ reward due to the collateral and overall setup for the offshore drilling company. $950 million was raised in September 2013, and the bonds mature Sept. 20, 2020. ODH operates three deepwater, semi-submersible rigs (Centenario, Bicentenario, and the La Muralla IV) and five jackup rigs in the Gulf of Mexico, and its primary “customer” is Mexico’s PEMEX. The reason the bonds trade at 40 include a fall in offshore day rates (from $500k to $300k), and the Bicentenario being suspended (current contract through June 2017). However, as of December 2016 Mexico will allow companies other than PEMEX to operate offshore, and if his assessment of the situation and valuation estimates are accurate, bondholders have limited downside risk (10 points) and could have 30 points of upside looking out to 2018 (not including the 8⅜ coupon).

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Idea Discussion

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