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S&P downgrades SM Energy's rating to selective default on distressed exchange from SNL Energy Finance Daily S&P downgrades SM Energy's rating to selective default on distressed exchangeByline: Stephen Cedric Jumchai S&P Global Ratings lowered oil and gas producer SM Energy Co.'s issuer credit rating to SD, or selective default, from CC and its issue-level ratings on certain of the company's senior unsecured notes to D from CC. The downgrade comes after SM Energy said it agreed to exchange new second-lien secured notes due 2025 for a part of its outstanding 2022, 2024, 2025, 2026 and 2027 senior unsecured notes held by certain note holders. The notes will be exchanged between 55% and 70% of par. Excluding bonds exchanged by note holders backstopping the transaction, the company has tendered $295.8 million of its old notes. Including the backstop group and 1.5% convertible notes due 2021, a total of $447 million of new 10% secured second-lien notes are expected to be exchanged for about $612 million of old senior notes and $107 million of old convertible notes. The exchange offer is expected to close June 17. The rating agency views the transaction as a distressed exchange, saying it "implies that the investors will receive less value than they were promised under the original securities." S&P Global Ratings also views the offer as distressed rather than opportunistic, according to a June 15 research update. Ratings previously downgraded SM Energy's issuer credit rating to CC from B- with a negative outlook on an exchange offer that the rating agency viewed as distressed. This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings. |
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