Fitch Downgrades Transocean to 'BBB'; Rating Outlook Stable

Business Wire, Nov 27, 2007

CHICAGO -- Fitch Ratings has downgraded Transocean, Inc.'s (Transocean)(NYSE:RIG) ratings to 'BBB' from 'BBB '. The Rating Outlook is Stable. The downgrade stems from Transocean's announced merger with GlobalSantaFe Inc. (GlobalSantaFe) and its intent to distribute $15 billion in cash to shareholders upon closing of the merger. Because the transaction will result in GlobalSantaFe becoming a subsidiary of Transocean, Fitch has also initiated ratings on the company. As a result, Fitch maintains the following ratings for Transocean:

Transocean:

--Issuer default rating (IDR) to 'BBB' from 'BBB ';

--Senior unsecured to 'BBB' from 'BBB ';

--Senior unsecured bank facility to 'BBB' from 'BBB '.

GlobalSantaFe:

--Issuer default rating (IDR) assigned at 'BBB';

--Senior unsecured rating assigned at 'BBB'.

The Rating Outlook is Stable.

The ratings reflect Transocean's intent to devote free cash flow during the next two years toward debt repayment, the significant visibility that the company has with regard to free cash flow levels as a result of its substantial contract backlog and the increased diversification and size of the company's fleet of offshore drilling rigs. Offsetting concerns relate to the company's increased willingness to accelerate the monetization of the revenue backlog, the possibility of future acquisitions and/or newbuilds which could reduce free cash flow levels and extend debt repayments and some limited uncertainty regarding future financial policies associated with the new Board of Directors.

Initial borrowings to fund the $15 billion cash dividend to shareholders will be funded by borrowings on a 364-day bridge facility. Fitch anticipates that the company will move quickly to reduce borrowings under the bridge facility by using a combination of capital markets issuances and bank term debt. The debt structure is anticipated to allow for a significant reduction in total balance sheet debt not only during the first two years following the consummation of the merger but also in the years following this period. This additional flexibility should allow the company to further reduce debt if market conditions weaken materially from current levels. As a result, Fitch anticipates rating future debt issuances consistent with the current IDR and senior unsecured ratings on the company's debt.

As a result of Transocean's commitment to devote free cash flows for the next two years to repay debt, the company is expected to reduce debt levels from the current approximately $17 billion to approximately $10 billion by year-end 2009. In addition to monitoring the company's progress toward its debt reduction objective, Fitch will also continue to monitor the strength of the company's contract backlog. This includes evaluating the backlog for counterparty risk which could reduce Fitch's confidence in the company's ability to monetize the backlog.

Transocean is the world's largest offshore drilling contractor with a fleet of 82 mobile offshore drilling units. Its mobile offshore drilling fleet, consisting of a large number of high-specification deepwater and harsh environment drilling units, is considered one of the most modern and versatile in the world due to its emphasis on technically demanding sectors of the offshore drilling business. Transocean's fleet consists of 33 High-Specification floaters (semisubmersibles and drillships), 20 other floaters, 25 jackup rigs and four other rigs.

GlobalSantaFe currently operates 59 offshore drilling rigs composed of 43 jackups, eight mid-water semisubmersibles, one deepwater semisubmersible, three deepwater drillships, two ultra-deepwater semis and two managed semis operated under a joint venture agreement.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.