Fitch Affirms SBM Baleia Azul, S.a.r.l.'s Sr. Secured Notes at 'BBB'

Fitch Ratings has affirmed the senior secured notes issued by SBM Baleia Azul, S.a.r.l. as follows:

--USD500 million 2012-1 senior secured notes at 'BBB'; Outlook Stable.

The notes are backed by the flows related to the charter agreement signed with Petroleo Brasileiro S.A. (Petrobras) for the use of the floating production storage and offloading unit (FPSO) Cidade de Anchieta for a term of 18 years. SBM do Brasil Ltda. (SBM Brasil), the Brazilian subsidiary of SBM Holding Inc. S.A. (SBM), is the operator of the FPSO. SBM is the sponsor of the transaction. The FPSO Cidade de Anchieta began operating at the Baleia Azul oil field in September 2012.

The current outstanding balance of the senior secured notes is $459.69 million. The next amortization payment is scheduled for December 2014. Fitch's rating addresses timely payment of interest and principal on a quarterly basis.

KEY RATING DRIVERS

Offtaker's Credit Quality

On March 26, 2014, Fitch affirmed Petrobras' local and foreign currency (FC) Issuer Default Rating (IDR) at 'BBB', with a Stable Rating Outlook. Petrobras' ratings are supported by the company's leadership position in the Brazilian domestic energy market, its recognized expertise in offshore exploration and production (E&P), and its strategic importance to Brazil. However, the Brazilian government's decision to assign to Petrobras the surplus volume of the transfer of rights at four presalt areas will further pressure the company's cash flow generation ability and weaken its stand-alone credit quality. Factors that could result in a negative action on Petrobras' ratings, independent of a sovereign downgrade, include the perception of a lower linkage between Petrobras and the government, together with a sustained weakening of the stand-alone credit metrics. Petrobras' rating acts as an implied cap to the ratings of this transaction.

Petrobras' Ambitious Capex Program

Petrobras has significant growth potential both in production and reserves, backed by an ambitious capital investment program, of USD220 billion between 2014 and 2018, and recent offshore discoveries.

Experienced Operator

SBM Offshore N.V. is the ultimate parent to the sponsor of the transaction. The transaction benefits from SBM Offshore N.V.'s solid revenue growth, global leadership in leasing FPSOs and overall strong operational performance (over 99.1%) of its fleet

Cashflow Stability

The transaction is not exposed to contract renewal risk. Cidade de Anchieta benefits from a long-term charter agreement with Petrobras expiring in 2030; the notes' expected maturity is 2027. Day rates are fixed and not exposed to market day rates. At closing the charter day rate was $233,631 and has been readjusted by inflation to current levels of $238,304.

Uptime Levels

During 2014, Cidade de Anchieta operated at an average oil uptime level exceeding 99%, in line with Fitch's expectations and SBM's excellent track record. Fitch's base case assumed an annual 'uptime' average of 98.5% (including bonus days). During 2013 and 2014, the maximum of 38 bonus days per year was paid as a result of not using any maintenance days. Considering bonus payments, the average economical uptime increases to 105.9% for 2014 and 106.7% for 2013.

Stable DSCRs

The actual average quarterly debt service coverage ratio (DSCR) without considering operating expenses (opex) during 2014 year was 1.91x, compared with 1.90x observed during the last three quarters of 2013.

Available Liquidity

The transaction benefits from a debt service reserve account (DSRA) equivalent to the following two quarterly payments of principal and interest. Currently, the DSRA consists of a $26 million LoC provided by ABN Amro ('A+', ON).

Productivity of Baleia Azul Field:

The FPSO Cidade de Anchieta is capable of processing a total of 100,000 barrels of oil a day with a storage capacity of 1,900,000 barrels and water injection capacity of 110,000 barrels of water per day. During 2014, daily production averaged approximately 85,000 barrels. Given the limited alternative use of the FPSO, the attractiveness of the oil field to the offtaker is an important consideration.

RATING SENSITIVITIES

The transaction's rating may be sensitive to movement in the credit quality of Petrobras as charter offtaker and deterioration of credit quality of SBM as operator and sponsor. In addition, the transaction's rating is sensitive to the operating performance of the FPSO Cidade de Anchieta.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--Global Structured Finance Rating Criteria - Aug 4, 2014;

--Criteria for Rating Oil Vessel-Backed Financing in Latin America - Jan. 14, 2014.

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Criteria for Rating Oil Vessel-Backed Financing in Latin America

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=728818

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=913494

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