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CQS Rig Finance Fund Ltd (RIG)

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Wednesday 13 October, 2010

CQS Rig Finance Fund Ltd

Extension to Financing & Trading Update

For immediate release: 13th October 2010


                          CQS Rig Finance Fund Limited
                                (the "Company")

             Extension to Financing Arrangements and Trading Update

 The Company is pleased to announce the following updates:

  * Agreement in Principle to Extend the Company's Secured Financing Facility

  * Execution of an Extension to the Company's Subordinated Financing Facility

  * Publication of the Company's Shareholder Fact Sheet for 30th September 2010

  * Portfolio Update

  * Market Outlook

 Extension to Financing Arrangements

The  Company  has  now  agreed,  in  principle,  the terms for extensions to its
secured   financing   arrangements   ("Secured  Facility")  with  Credit  Suisse
Securities  (Europe) Limited ("CS")  and executed an  extension to its unsecured
loan  facility ("Subordinated Facility") with  RBC Cees Trustees Limited ("RBC")
on  12th October 2010.  The extensions to the financing facilities, which in the
case  of  the  Secured  Facility  is  subject  to  finalisation  and  signing of
documentation,  will  provide  a  stable  liability  structure  to  support  the
Company's portfolio of investments.

The  Company has agreed  an extension to  the Secured Facility,  entered into on
22nd April  2009 which  matures  on  21st October 2010, to 31st March 2011.  The
Secured  Facility will continue  to attract interest  at a rate  of the relevant
LIBOR rate for each Currency Amount (except for NOK which has a NIBOR rate) plus
2 per cent.

The Company has agreed with CS that the USD 2,800,000 facility fee, which is due
on  the maturity of the existing  Secured Facility on 21st October 2010, will be
added  to the outstanding Secured Facility balances as at that date to form part
of  the  initial  committed  balances  under  the  terms of the Secured Facility
Extension  Agreement.  The facility fee has been  accrued in the Net Asset Value
("NAV")  over the life  of the existing  Secured Facility and  the impact to NAV
over  the remaining period  from the NAV  on 30th September 2010 to 21st October
2010 will be approximately 25 basis points.

The  Company  has  agreed  with  RBC  that  advances made under the Subordinated
Facility,  which was originally entered  into on 24th October 2008 and currently
matures  on 21st October  2010, will be  extended until  21st October 2011.  The
Subordinated  Facility will continue to attract  interest at the three month USD
LIBOR rate plus 3 per cent.  All other terms will remain the same.

The Subordinated Facility has been provided by RBC in its capacity as trustee of
certain  assets for the benefit  of Michael Hintze, Chief  Executive of CQS, who
holds a majority interest in CQS Cayman LP, the Company's investment manager.

 Current Liquidity Position

The  unaudited Cash / (Loan) Balances per  the Company's books and records as at
30th September 2010 were as follows:

                          Currency Local Currency Balance GBP Equivalent Balance

Secured Facility               NOK              6,994,623                757,518

                               USD           (40,546,360)           (25,808,447)

                               GBP             20,133,015             20,133,015
Outstanding under Secured
Facility (CS)                                                        (4,917,914)

Subordinated     Facility
(RBC)                          USD           (6,657,840)*           (4,237,828)*


Total unaudited net cash outstanding at 30th September               (9,155,743)

*  Including Capitalised

The  proforma  total  unaudited  net  cash  outstanding at 30th September 2010,
adjusted  for the USD 2,800,000 facility maturity  fee due to CS on 21st October
2010, equates to GBP (10,937,990).

Monthly Shareholder Fact Sheet

CQS  Rig Finance Fund Limited (the  "Company") a closed-ended investment company
incorporated in Guernsey, is pleased to announce that its Monthly Fact Sheet for
September 2010 is now available on the Company's website (
and    includes    information  on  the  top  ten  investments  and  outstanding


Following  the  sell  off  in  August  there  was  a  broad  based risk rally in
September.  European Sovereign debt concerns were once again on investors' minds
during  the month but these were eclipsed  by better than expected economic data
from China and the US.  The S&P 500 broke through resistance levels to close the
month  up 8.8% at 1141.  The oil  price followed the trend  closely to reach the
USD 80 per barrel mark.

The  final NAV per share  closed up 4.5% at the  end of September 2010 at 27.64
pence against 26.46 pence at the end of the prior month.

Gains  were seen across  much of the  portfolio as demand  for high yield assets
increased and three distressed positions were marked up.

Remedial  (Cyprus) PLC continued to rally following the news, as reported in the
previous  fact sheet, that an  agreement had been reached  to sell the Elevating
Support  Vessel  under  construction  at  Yantai  Raffles to a subsidiary of the

Rubicon  Offshore Holdings was marked up in September.  There were buyers of the
bonds on no material newsflow.

The  Petromena 10.85% bonds were marked up  in September on speculation that the
liquidation  process may be  progressing. ODS Petrodata  reported market sources
saying  that the Larsen Oil  & Gas-managed semi 'SS  Petrolia' is being marketed
for sale. This rig forms part of the security package for the 10.85% bond.

The  Company also entered a new investment  during the month purchasing the 2nd
lien  bonds  of  RDS  Ultra-Deepwater  Ltd.   The  bonds  have a fixed coupon of
11.875% and are callable in 2014 at 105.9.

Deleveraging and Financing Arrangements

Total  liabilities decreased  over the  month from  GBP18.9m to  GBP10.9m at 30
September.  The largest contribution to this reduction came from the sale of the
position  in  Sevan  Drilling,  as  reported  in  the  RNS announcement on 21st
September 2010.  The sale of the bond was undertaken following the news that the
drilling  rig had stopped  operations and was  on zero day-rate  during a repair
period.   Sevan has since  announced that the  rig is back  in operation and the
Company has re-entered the bonds at lower levels.

The  Company expects borrowings to  further reduce as a  result of the mandatory
call  of the Skeie Drilling & Production ASA (SKDP) bonds by Rowan Companies Inc
(See Portfolio Update section for details).

The  Company has agreed terms  for extensions to both  its secured and unsecured
financing arrangements, extending the maturities of both facilities into 2011.

Portfolio Update

Rowan  Drilling Norway ASA  (formerly known as   Skeie Drilling & Production ASA

Following  its  takeover  of SKDP,  Rowan announced  on 21 September 2010 that a
mandatory  prepayment event will be triggered of all indebtedness secured by the
SKDP  1 Ltd.  The SKDP1 first  lien bonds will be  redeemed at 108% of par value
plus  accrued interest and the second lien bonds will be redeemed at 106% of par
value.  The exact  date of  the intended  call has  not yet been confirmed.  The
other  two second lien bonds issued by SKDP may also be called but Rowan has not
made  any announcements in this regard.  The  Company owns all four bonds issued
by SKDP.

Remedial Cyprus/Cayman

On  26 February 2010 Remedial Cyprus filed a motion with the US Bankruptcy Court
for  orders under section 363 of  the US Bankruptcy Code  authorizing it to sell
substantially  all of its business and assets to a nominee of the holders of the
USD  210 million FRN secured  callable bonds 2007/12 issued  by Remedial Cyprus.
 The  proceeds of  the sale  of the  assets will  form the  recoveries under the

On  7 July  2010 Remedial  Cayman  ESV2  Limited,  a  wholly-owned subsidiary of
Remedial  Cayman took  delivery of  the vessel  Remedial ESV Solution from COSCO
Shipyards  in Nantong, China.  This vessel is  presently berthed at COSCO and is
being  marketed for sale.   On 5 October, Remedial  Cayman completed the sale of
the  construction contract for its second ESV unit, and its related workover rig
package,  to Coral Offshore Pte  Limited, which is a  subsidiary of CIMC Raffles
Offshore  (Singapore)  Limited  (formerly  known  as  "Yantai  Raffles  Shipyard
Limited")  for  a  purchase  price  of  USD  55.0 million.  On the basis of this
purchase  price  and  the  release  of  Remedial's  obligations under the Yantai
construction  contract  the  transaction  has  a  value of approximately USD 90
million.   Remedial has  received a  10% downpayment of  USD 5.5 million for the
sale of this vessel, with the balance to be received in 9 months time.

Marine Subsea

Marine  Subsea completed a successful  financial restructuring in December 2009
which  permitted it to attract fresh bank financing in excess of USD 200 million
from  Standard  Bank  and  the  Norwegian  Credit  Agency  Eksportfinans.   This
stabilized  the company for  a while but  subsequent disagreements with its main
customer,  Sonangol, over  a back-stop  charter on  the well intervention vessel
'Sarah'  have  meant  that  the  company  has  not  received charter payments as
expected, which in turn has led to a liquidity shortfall.  The Sarah needs to be
fitted with critical lubricator equipment  in order to perform well intervention
work,  which is necessary for Sonangol's Canuku  project. Until this is in place
Sonangol has stated that it cannot make payments under its back stop charter. As
a  result  of  this,  Marine  Subsea  has  not  been  able  to  meet its payment
obligations to Eksportfinans and Standard Bank. Further, the company has elected
to  PIK interest payments  due on the  bonds, as it  is permitted under the bond
agreement.   The  company's  second  vessel  'Karianne'  is  due for delivery in
October 2010  The bonds are marked at a bid price of 28 cents.

Rubicon Offshore Holdings Limited

The  two Rubicon Floating Production Storage and Offloading vessels ("FPSO") are
presently  on contract and operating in Asia.  The 'Rubicon Intrepid' is located
at  the Galoc  Field, offshore  Phillipines, where  it is  on contract  to Galoc
Production  Company, the operator of the  Galoc Field.  The 'Rubicon Vantage' is
located  at the  Bualuang Field,  offshore Thailand,  where it  is contracted to
Salamander  Energy.   The  company's  USD  180 million  bond, due April 2012, is
presently performing with a USD 30m amortization scheduled for April 2011.

Petromena As

The  Petromena ASA 10.85% 2010 bond remains  in default and under restructuring.
 Current  outstandings  under  the  bond  are  USD  264 million.  The main asset
securing  the  bond  is  the  'SS  Petrolia',  a 2nd generation semi submersible
drilling  rig.  The rig completed its contract  with Pemex in Mexico in July and
is  presently sitting  idle in  the US  Gulf of  Mexico being marketed for sale.
 Recoveries  under the bond  will be driven  in part by  the resale value of the
rig.   In addition to the rig collateral bondholders are likely to have recourse
to  cash held in various jurisdictions  but given ongoing litigation proceedings
the  timing  and  amount  of  recovery  cannot be quantified with any certainty.
 Bondholders  have appointed financial and legal advisors to assist them in this
process. The bonds are marked at a bid price of 36 cents.

Sevan Marine ASA/Sevan Drilling

Sevan currently has three FPSO's and one drilling rig in operation.  The Company
owns  the four bonds which are secured on these assets.  Sevan has recently made
several positive announcements regarding its vessel operations - an extension to
the  FPSO  contract  for  the  'Sevan  Hummingbird' FPSO vessel on contract with
Centrica,  the  finalisation  the  commercial  negotiations on the Charter Party
Agreement  for  the  lease  of  the  FPSO  'Sevan Voyageur' for operation on the
Huntington  field and a new bank financing  facility secured by an assignment of
certain future contracted cash flows.  The new bank loan is a club deal arranged
by  Investec Bank  plc.  Sevan  is currently  working on  bank financing for the
'Sevan Driller' which will improve its liquidity position going forward and will
lead to the take out the existing Driller bonds. The call window for the Driller
bonds opens 11 Dec 2010 and runs for six months.

DDI Holdings

The  first lien DDI bonds are well secured by modern jack up units, all of which
are  presently on contract.  These  bonds are issued on  a stand-alone basis and
pre-date  the acquisition of DDI by the parent company, Aban Offshore Ltd.  Aban
announced  recently that it  had received shareholder  approval to raise over Rs
4,300 crore  (c.USD 955 million)  financing from  foreign and  domestic sources.
 However, the company has yet to announce the timing of any capital raise.

RDS Ultra-Deepwater Ltd

RDS  bought the 6th generation deepwater rig  ('Petrorig III') from the bankrupt
Petromena group.  This rig has been chartered to Pemex for 5 years at a day rate
of  USD 495K/day for the first two years  after which the charter rate would set
annually  based  on  then  prevailing  market  rates.   On the 6th September RDS
announced that the rig had commenced operations and that the mobilization fee of
USD 34.5 million from Pemex became due.

Vantage Drilling Company (VTG)

VTG  raised financing via a  bond issue to acquire  total ownership of an ultra-
deepwater drillship ('Platinum Explorer') and to meet the remaining construction
payments on the vessel, due to be delivered from Daewoo Shipbuilding in November
2010.  Security  for the transaction are first  liens on the 'Platinum Explorer'
and  three new  premium jack-up  rigs and  their related charter contracts.  The
next  important milestone for  Vantage is acceptance  of the 'Platinum Explorer'
vessel by ONGC, which is expected to be at the end-December 2010.

Floatel International

Floatel  has  ordered  two  dynamic  positioning  semi-submersible accommodation
vessels  from  Keppel  FELS  Shipyard  in  Singapore. The first vessel, 'Floatel
Superior',   was  delivered  on  18th March  2010 and  commenced  first  charter
immediately  on  delivery.  The  second  vessel,  'Floatel  Reliance',  is under
construction and is scheduled for delivery late 2010.

FPS Ocean (DP Producer)

Following  DP Producer AS' bankruptcy in February 2009, no further work has been
undertaken  on the FPSO and the  vessel remains berthed at Drydocks World-Dubai.
 The  Trustee (via a  bondholders' committee) and  the shipyard continue to work
jointly  to progress a sale; however in the face of weak market conditions their
efforts  have yet to  bear fruit.  It  is the Company's  view that any sale, and
associated  bond recoveries, is  dependent on a  fuller recovery of FPSO demand,
however  opportunistic approaches from operators  and/or end-users cannot not be
ruled out.  The bonds are marked at a bid price of 1 cent.

As  well as the positions detailed above,  the Company also holds positions with
small  mark  to  market  values  in  Viking  Drilling, Seaproduction, Petromena,
Petroprod and Nexus.

Market Outlook

The  market in  general appears  in better  shape than  12 months ago as the oil
price  has stabilised in the USD  75-85 range. Industry analysts are forecasting
further  increased Exploration &  Production ("E&P") spending  by the oil majors
and national oil companies of 10% and by independent companies of 15% in 2011.*


Contrary  to earlier expectations of some industry observers, recent data points
for  ultra-deepwater new-builds  indicate that  day-rates have stabilized around
the  USD 400-450K level, as seen for Maersk, Odfjell and Transocean units.  More
recently,  continuing  the  recent  trend  of  strong  Ultra  Deep Water ("UDW")
fixtures,  Dryships announced  a 300-day  letter of  award in  West Africa  at a
dayrate of USD 450,000 for the first of its 4 UDW drillships under construction,
while  Chevron agreed to sublet the  UDW drillship Deepwater Pathfinder from Eni
at  a subsidised dayrate believed to  be between USD 525,000 to 550,000 for work
in  the Gulf of Mexico.  Following the Macondo  spill in the Gulf of Mexico, new
rules  for  drilling  operations  have  been  released  including more stringent
regulation  with regards to well design,  cementing and blow out prevention. The
drilling  ban is currently in place  until 30 November 2010 and normalisation of
drilling  activities in the  US Gulf of  Mexico may take  longer due to expected
lengthy permit processes once the ban is lifted.

The  midwater market continues to show signs of life with utilisation continuing
to  creep higher.  Currently  the overall utilisation  of the fleet is 85% while
the  marketed utilisation is now at 93%**.  The international jack-up market has
developed  into a  two tier  market over  the past  quarters, with E&P companies
showing  a clear  preference for  modern build  units. Marketed  utilisation has
increased  from 81% to  84% during the  past six  months for the overall jack-up
fleet,  while utilisation  for modern  high-spec units  has increased up to 96%
currently,  from 88% at year-end 2009**.  After a  worldwide lull in new jack-up
orders  from the U.S.  drillers since RDC  ordered 6 jack-ups in November 2007,
Atwood  Oceanics Inc.  announced the  order of  two high-spec  jack-ups from PPL
Singapore  and Maersk is  reportedly in discussions  to build two new CJ-70 type

Floating Production Storage & Offloading ("FPSO")

The  FPSO market has come back to  life after the lull of 2008/9.  International
contractors  such as SBM, Modec, Teekay and Maersk have guided on strong markets
ahead  for the segment.  Meanwhile consolidation activity has been seen with the
acquisition  of Prosafe Production  by BW Offshore  to create the second largest
FPSO company in the world.  The number of companies involved with FPSOs has been
cut  in half from approximately 30 in the  2006 to n2008 period to less than 15
presently  which bodes  well for  established players  and the  stability of the

Oil Services

The  strong price of crude has been  very supportive to the Oil Services sector.
While  initially  the  US  based  companies  were  negatively  impacted  by  the
moratorium  on drilling, over time the market  has become much more confident on
the  expectation  of  increased  orders  for  these  companies  due to increased
regulation  e.g.  increased  decommissioning  of  platforms  and plugging of old

High yield outlook

The high yield market has reopened and the Company has made new investments over
the  last few  months into  issuers including  Sevan, Vantage,  RDS and Floatel.
These  companies  are  raising  finance  to  fund  final  yard payments, capital
expenditure  and the purchase of completed  assets and as such construction risk
is  dramatically reduced  compared with  the financing  of early stage new-build
projects.   The market views the risk reward of these bonds as attractive as all
have  rallied strongly since issue.  All the  bonds came with double digit fixed
coupons  and benefit  from premium  call clauses.   These clauses can prove very
beneficial  in  the  current  climate  of  consolidation  where we have seen M&A
activity  across the Drilling, FPSO and Oil  Services sectors with the tie up of
Rowan/Skeie, BW Offshore/Prosafe and Acergy/Subsea.

For further information, please contact:

Hugh Field
Director, Corporate Finance
Arbuthnot Securities Limited
Telephone 020 7012 2000

Lynette Le Provost
Corporate Secretariat
Kleinwort Benson (Channel Islands) Fund Services Limited
Telephone 01481 727111

* Pareto Securities Research
** RS Platou Markets Research

All other market data sourced from Bloomberg .

This  announcement is not an offer to sell or a solicitation of any offer to buy
any  securities in the United States or  in any other jurisdiction. Neither this
announcement  nor  any  copy  of  it  may  be taken, transmitted or distributed,
directly  or indirectly, into the United States, Canada, Australia, the Republic
of  Ireland, the Republic  of South Africa  or Japan or  to any national of such
jurisdictions.  Neither this announcement nor any copy hereof may be distributed
in  any other jurisdictions where its distribution  may be restricted by law and
persons  into  whose  possession  this  document  comes should inform themselves
about,  and observe, any such restrictions. Distribution of this announcement in
the  United States, Canada, Australia, the  Republic of Ireland, the Republic of
South  Africa, Japan or any such  other jurisdictions may constitute a violation
of the law of such jurisdictions.


This announcement is distributed by Thomson Reuters on behalf of 
Thomson Reuters clients. The owner of this announcement warrants that: 
(i) the releases contained herein are protected by copyright and 
    other applicable laws; and 
(ii) they are solely responsible for the content, accuracy and 
     originality of the information contained therein. 
Source: CQS Rig Finance Fund Ltd via Thomson Reuters ONE


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