Moody's Downgrades Borr Drilling's Outlook to Stable; Affirms B3 Rating

Moody’s Ratings has confirmed the B3 ratings for Borr Drilling Limited and its wholly-owned subsidiary, Borr IHC Limited. Additionally, the outlook for both entities has been revised from positive to stable. This rating action reflects Moody's expectation that low contract coverage could slow Borr's debt reduction process in the next 12-18 months, while the company’s credit metrics are expected to remain within the B3 rating category.

In 2024, Borr recorded a 31% revenue growth, and its gross leverage ratio (Moody's adjusted) decreased from 4.7x in 2023 to 4.2x. However, significant additional debt taken to finance the acquisition of two new drilling rigs has initially slowed the pace of debt reduction. Issues with contract collections from Petroleos Mexicanos (PeMex) negatively impacted free cash flow formation by $150 million, with expectations that at least 75% of these receivables will be collected by early 2025.