Memorial Production Partners L.P. Downgraded To 'CCC-' From 'B-' On Potential Distressed Exchange; Outlook Negative
it lowered its corporate credit rating on Memorial Production Partners L.P.
(MEMP) to 'CCC-' from 'B-'. The rating outlook is negative.
At the same time, we lowered our issue-level rating on the company's senior
unsecured debt to 'C' from 'CCC'. The '6' recovery rating is unchanged,
indicating our expectation for negligible (less than 10%) recovery of
principal for creditors if a payment default occurs.
"The downgrade reflects our view that MEMP could undertake a distressed
exchange for its senior unsecured notes within the next six months," said S&P
Global Ratings' credit analyst Christine Besset. MEMP announced on Oct. 28
that the borrowing base on its revolving credit facility was reduced to $740
million from $925 million (the company currently has $714 million drawn on
it), and that it had hired financial advisors to assist in reviewing its
capital structure.
We consider an exchange offer as distressed, or tantamount to default, if we
believe the offer implies the investor will receive less value than the
promise of the original securities and if we view the offer as distressed
rather than purely opportunistic. Per our criteria, we would value an offer at
less than the original promise if the amount offered is less than the original
par amount, if the interest rate is lower than the original yield, or if the
new securities' maturity dates extend beyond the original, among other
factors, without offsetting compensation.
The negative outlook reflects the likelihood that MEMP will undertake a
distressed exchange over the next six months, absent a potential strategic
transaction or capital infusion.
We could lower the corporate credit rating if MEMP announced its intention to
undertake a distressed exchange, or if we believed a default was inevitable.
We could raise the rating if MEMP were able to stabilize its liquidity
situation and capital structure without a distressed transaction or a default
on its debt.
- 01-Nov-2016 20:09 GMT
- We believe U.S. oil and gas exploration and production partnership
Memorial Production Partners L.P. (MEMP) could undertake a distressed
exchange within the next six months. - We are lowering our corporate credit rating on MEMP to 'CCC-' from 'B-'.
- We are also lowering our issue-level rating on the company's senior
unsecured debt to 'C' from 'CCC'. The '6' recovery rating is unchanged. - The negative rating outlook reflects the potential for a downgrade if
MEMP announces what we would consider a distressed exchange for its
senior unsecured notes.
it lowered its corporate credit rating on Memorial Production Partners L.P.
(MEMP) to 'CCC-' from 'B-'. The rating outlook is negative.
At the same time, we lowered our issue-level rating on the company's senior
unsecured debt to 'C' from 'CCC'. The '6' recovery rating is unchanged,
indicating our expectation for negligible (less than 10%) recovery of
principal for creditors if a payment default occurs.
"The downgrade reflects our view that MEMP could undertake a distressed
exchange for its senior unsecured notes within the next six months," said S&P
Global Ratings' credit analyst Christine Besset. MEMP announced on Oct. 28
that the borrowing base on its revolving credit facility was reduced to $740
million from $925 million (the company currently has $714 million drawn on
it), and that it had hired financial advisors to assist in reviewing its
capital structure.
We consider an exchange offer as distressed, or tantamount to default, if we
believe the offer implies the investor will receive less value than the
promise of the original securities and if we view the offer as distressed
rather than purely opportunistic. Per our criteria, we would value an offer at
less than the original promise if the amount offered is less than the original
par amount, if the interest rate is lower than the original yield, or if the
new securities' maturity dates extend beyond the original, among other
factors, without offsetting compensation.
The negative outlook reflects the likelihood that MEMP will undertake a
distressed exchange over the next six months, absent a potential strategic
transaction or capital infusion.
We could lower the corporate credit rating if MEMP announced its intention to
undertake a distressed exchange, or if we believed a default was inevitable.
We could raise the rating if MEMP were able to stabilize its liquidity
situation and capital structure without a distressed transaction or a default
on its debt.
