Reuters - (The following statement was released by rating agency RPT-Fitch Solutions) Credit default swaps (CDS) on Diamond Offshore Drilling Inc. (Diamond) have widened 47% over the past month, according to Fitch Solutions.
Diamond's CDS significantly underperformed the 3.4% CDS tightening for the broader North America oil and gas sector over the same time period. Additionally, the cost of credit protection on Diamond's debt has been climbing steadily since late January.
After trading consistently at 'A/A+' levels since November 2013, CDS on Diamond have widened to price in-line with 'BBB+' levels. 'Wider CDS spreads are likely indicative of Diamond's lower earnings as well as market concerns surrounding the broader offshore drilling industry,' said Director Diana Allmendinger. Fitch Solutions case studies build on data from its CDS Pricing Service and proprietary quantitative models, including CDS Implied Ratings. These credit risk indicators are designed to provide real-time, market-based views of creditworthiness. As such, they can and often do reflect more short term market views on factors such as currencies, seasonal market effects and short-term technical influences. This is in contrast to Fitch Ratings' Issuer Default Ratings (IDRs), which are based on forward-looking fundamental credit analysis over an extended period of time.