Brazil to Transocean: Pay Up or Shut Up

It’s a big week for offshore drilling power-player Transocean (NYSE:RIG). The company has issued $750 million in 2.5 percent five-year securities and $750 million in 3.8 percent 10-year notes. The debt is yielding more than market benchmarks, perhaps in light of a ruling from a Brazilian court which could prevent the rig contractor from operating in the country.

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Prosecutors are after $20 billion in damages from both Transocean and Chevron (NYSE:CVX) for a 3,600-barrel spill last November. This ban is aimed at trying to secure payment from Transocean, which generates about 11 percent of its revenue from its Brazilian rigs. This ruling comes after news that the company is cutting its 2013 revenue estimates by about $1.2 billion.

Transocean, as the owner of the Deepwater Horizon rig which was destroyed in the 2010 Gulf of Mexico Disaster, is also on the line for billions in damages along with British Petroleum (NYSE:BP). Joe Hill, an analyst with Tudor Pickering, thinks that Transocean could be liable for as much as $18 billion sought by the United States Justice Department.

Transocean has only peeked downward less than a percent on the news, as investors seem to share CEO Steven Newman’s optimism: “we believe strongly in the merits of our case, and I’m confident that we will ultimately prevail.”

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