S&P raises McDermott to 'BB+' on performance

A rating of "BB+" is S&P's highest non-investment grade rating.

The rating agency also affirmed its "1" recovery rating on McDermott subsidiary Babcock & Wilcox Cos.'s $400 million senior secured credit facilities. The rating indicates a 90 percent to 100 percent recovery in the event of a payment default, S&P said.

It also reaffirmed its "3" recovery rating on subsidiary J. Ray McDermott SA's $800 million senior secured credit facilities, meaning the agency sees a 50 percent to 70 percent chance of recovery in the event of a default.

S&P also raised the issue rating on B&W's bank debt to "BBB" and on J. Ray McDermott's to "BB+."

"The ratings upgrades were driven by McDermott's strong operating performance in 2007, impressive backlog across all three of its business units and conservative financial leverage," S&P credit analyst David Lundberg said in a statement.

In February, McDermott posted 2007 earnings of $607.8 million, or $2.66 per share, up from $330.5 million, or $1.45 per share, in 2006.

Shares of McDermott gained $2.39, or 4.2 percent, to $59.63 on Wednesday.