S&P turns Strathcona outlook to negative

S&P said it changed the outlook for Strathcona Resources Ltd. to negative from stable and affirmed its B+ issuer rating and BB- rating on its senior unsecured notes. The 2 recovery rating on the notes is unchanged.

“The impending maturity on the term loan is a key risk. Strathcona's C$675 million term loan matures on Feb. 29, 2024. The company expects to repay the term loan in entirety but has so far made only modest payments. We expect management to repay about C$150 million in August 2023 based on excess cash flow sweeps, with the remaining outstanding balance of C$525 million being repaid from free cash flow generation and drawings under the credit facility, the latter of which remains highly drawn.

“However, we do not believe delaying repayment till maturity demonstrates prudent risk management because it exposes the company to unanticipated adverse market or operational events that could pressure its ability to address the maturity in a timely manner,” S&P said in a press release.

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