DBRS Downgrades SBM Deep Panuke S.A.’s Senior Secured Notes to BB (high), Trend Remains Negative

DBRS Limited (DBRS) has today downgraded the 3.50% Senior Secured Notes due 2021 (the Notes) issued by SBM Deep Panuke S.A. (the Issuer) to BB (high) from BBB (low). The trend remains Negative.

The downgrade of the Notes follows DBRS’s rating action on Encana Corporation (Encana) on July 15, 2016, in which DBRS downgraded the Issuer Rating of Encana to BBB (low) from BBB, and maintained the Negative trend on Encana’s Issuer Rating. Encana is the lessee of the Deep Panuke Production Facility Centre (the Platform) under a Charter Agreement that extends five months beyond the full amortization period of the Notes, which will be fully amortized by December 2021.

Under the Charter Agreement, Encana is responsible for paying a fixed lease rate to the Issuer for use of the Platform. If Encana elects to terminate the Charter Agreement, it must pay a Termination Fee, which, together with the proceeds of the debt service reserve account and other cash balances of the Issuer, would be sufficient to fully repay the Notes. The rating on the Notes is therefore strongly influenced by Encana’s ratings. The rating of the Notes is one notch lower than Encana’s Issuer Rating. Under the Charter Agreement, if the Issuer or SBM Offshore is bankrupt or insolvent, Encana may terminate the Charter Agreement and would then have no further obligation to pay the lease rate.

Currently, the performance of the Platform complies with the terms of the Charter Agreement.

Notes:
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The applicable methodology is Rating Project Finance (June 2016), which can be found on our website under Methodologies.