S&P assigns B to Vital Energy notes

S&P said it rated Vital Energy Inc.’s planned $575 million of senior unsecured notes B issue-level and 4 recovery ratings. The 4 recovery rating indicates average (30%-50%; rounded estimate: 45%) recovery of principal to creditors if Vital defaults.

“At the same time, we revised our recovery rating on the company's existing senior unsecured notes to 4 from 3. The lower recovery rating reflects both a decline in Vital's year-end PV10 value of proved reserves under our recovery price assumptions and the increase in its outstanding debt. Our B issue-level rating on the existing notes is unchanged,” the agency said in a press release.

The issues are $700 million of 10 1/8% senior unsecured notes due 2028, $298 million of 7¾% senior unsecured notes due 2029, and $500 million of 9¾% senior unsecured notes due 2030.

The company intends to use the proceeds and balance sheet cash and/or borrowings on its reserve-based lending credit facility, to repay up to $475 million in principal of its $700 million of 10 1/8% senior unsecured notes due 2028 and up to $75 million in principal of its $500 million of 9¾% senior unsecured notes due 2030 through cash tenders.

The outlook is positive.

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