Halliburton, one of the world’s largest oilfield services providers, has been downgraded by Moody’s following the failed attempt to take over its rival Baker Hughes. Baker Hughes, the used-to-be target company has been downgraded as well.

Halliburton’s senior unsecured debt rating has been downgraded to Baa1 from A2 and its short-term rating to P-2 from P-1. The outlook is negative.

To remind, on November 16, 2014, Halliburton said that it had reached an agreement to acquire BHI in a cash and stock transaction valued at the time at $34.6 billion, however the deal collapsed after the merger failed to obtain necessary approvals from the antitrust authorities, with Halliburton also paying the $3.5 billion termination fee.

“Debt incurred to finance its failed bid to acquire Baker Hughes Incorporated (BHI) together with the negative impact on profitability and cash flow of the very weak oilfield services environment have eroded HAL’s credit metrics to levels which no longer support its A2 rating,” said Andrew Brooks, Moody’s Vice President. “Depending on the pace of a broader energy market recovery, HAL’s debt leverage should peak in 2016, subsiding in subsequent years but is unlikely over the next several years to fall inside the 2.0x debt/EBITDA level that prevailed prior to 2015.”

As for Baker Hughes, Moody’s downgraded the company’s senior unsecured rating to Baa1 from A2 and its commercial paper rating to Prime-2 from Prime-1. The rating outlook is stable.

“The downgrade reflects Baker Hughes’ elevated leverage and developing business model underpinned by the current oilfield services segment weakness and the failed Halliburton merger,” said Terry Marshall, Moody’s Senior Vice President. “BHI plans significant cost cutting and restructuring measures that will improve EBITDA and leverage in 2017, which will support the Baa1 rating.”