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S&P upgrades Venoco
Standard & Poor’s said it raised the corporate credit rating on Venoco Inc. to CCC+ from SD (selective default), along with the ratings on its senior unsecured notes to CCC- from D.
The recovery rating on these notes remains at 6, reflecting 0 to 10% expected default recovery.
The outlook is negative.
The agency also said it affirmed the ratings on parent company Denver Parent Corp., including its CCC+ corporate credit rating and CCC- unsecured issue-rating. The ratings also were removed from CreditWatch, where they were placed with negative implications April 3, S&P said.
The outlook on Denver Parent was revised to negative from stable.
The upgrades follow a review of Venoco’s credit profile in conjunction with the release of its year-end 2014 financial results, the agency said, and the completion of the exchange of its senior unsecured notes whereby existing investors received new second-lien notes at 77˝% of par value.
The exchange is viewed as tantamount to default because investors received less than the promise of the original securities, S&P said.
Concurrent with the exchange, Venoco issued $175 million of first-lien notes and entered into $75 million of cash-secured senior term loans. The company’s senior secured credit facility was subsequently terminated.
The recovery rating of 6 on Venoco’s senior unsecured notes considers the increase in secured debt ahead of the notes in the capital structure, the agency said.
With the issuance of the first-lien notes and cash-secured term loan, the company has an improved liquidity, which is now considered adequate, S&P said.
The agency said it expects sources will exceed uses by more than 1.2x at least over the next 12 months even if EBITDA declines by 15%.
The outlook is negative, reflecting a view that Venoco might pursue additional debt exchanges in which investors receive less than what was promised on the original securities, S&P said.
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