Moody's rates EP Energy notes Caa2

Moody's Investors Service said it assigned a Caa2 rating to EP Energy LLC's proposed $1.2 billion senior secured notes due 2024.

The Caa1 corporate family rating and B3 rating on the 1¼-lien senior secured notes were affirmed.

The ratings on the second-lien term loans and senior unsecured notes also were downgraded one notch.

The SGL-3 speculative grade liquidity rating was affirmed, Moody's noted.

The company's probability of default rating was changed to Caa1-PD/LD (limited default) from Caa1-PD.

The outlook remains stable.

The company's proposed notes offering will be used to exchange the new senior secured notes due 2024 for its outstanding 9 3/8% senior unsecured notes due 2020 at par, as well as for its 2022 and 2023 notes at discounts to par.

Moody's said it considers EP Energy's notes exchange as a distressed exchange, which is an event of default under the agency's definition of default.

The agency said it added a LD designation indicating a limited default, which will be removed after three business days.

EP Energy's debt-exchange transaction, which extends its debt maturities, as a modest credit positive, Moody's said.

The ratings also consider the company's high leverage and an expectation the company will continue to generate weak leverage and coverage credit metrics, the agency said.

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