- Seadrill Partners (SDLP -6.8%) is downgraded to Underperform from Market Perform at Wells Fargo, which says "continuing risks ranging from counterparty/rollover risks to credit/covenant/cross default risks make any case for residual value thesis for the equity difficult."
- Wells says that while SDLP’s liquidity/leverage is in good shape for now, tangible risks to its cash flow combined with covenant requirements for term loan B makes an eventual covenant breach a likely scenario in late 2017 or early 2018.
- The firm also notes the risk of cross default from parent Seadrill remains on the table, as SDLP has two facilities – West Vela and West Polaris - with cross defaults with the parent; even as SDLP continues to build cash, Wells thinks there’s likely a long line of claims for that cash almost all of which is senior to common unit holders.