Boart Longyear rating downgraded

Ratings agency S&P revises debt ratings downwards, now at parity with Moody's.

Ratings agency Standard and Poor's has downwardly revised drilling services provider Boart Longyear's (BLY) debt ratings as demand for drilling equipment from resources companies falls.

S&P cut Boart's corporate credit rating to CCC with a negative outlook, from CCC . 

The agency downgraded Boart's secured note rating to B- from B and cut its unsecured note rating to CCC from CCC . 

S&P said Boart's capital structure was "unsustainable" in the current environment, with its liquidity likely to erode further over the next year due to weak performance.

"A violation of the company's financial performance covenants over the next year is a likely event," S&P credit analyst David Kuntz said.

The agency does not believe an upgrade is likely over the next year. 

Boart chief executive Richard O'Brien said the move does not affect the company's bank covenants and puts S&P's rating at parity with Moody's.

"We recognise that the recent downgrades by the rating agencies may present concerns for our creditors and other company stakeholders," Mr O'Brien said.

"We are committed to addressing those concerns as promptly as possible through the completion of the strategic review of recapitalisation options."

Mr O'Brien said the group's underlying franchise remains strong and continues to generate positive cash flow despite lower demand for exploration and drilling services.

"We have the liquidity and financial resources to fund all of our operations for the foreseeable future, including meeting our obligations to our suppliers and other creditors, and we are confident we will be able to identify an effective solution to our capital structure."

Boart last week said it continues to consider all possible options for recapitalisation in its strategic review, after media reports that it had started working with insolvency practitioners that specialise in saving companies from collapse.

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