S&P cuts Perpetual Energy, notes

Standard & Poor's said it lowered its long-term corporate credit rating on Perpetual Energy Inc. to CC from CCC+.

The outlook is negative.

At the same time, the agency lowered its issue-level rating on the company's senior unsecured notes to C from CCC. The recovery rating is unchanged at 5, indicating an expectation of modest recovery (10% to 30%; in the high end of the range) in the event of a default.

S&P said the downgrade follows Perpetual's announcement that it launched a securities swap proposal to existing holders of its 8¾% senior unsecured notes (both due 2018 and 2019) for shares of Tourmaline Oil Corp. held by the company. Based on current market values, the agency estimates the total considerations offered equals about 55% of the bonds' par value.

The expected closing date is April 27.

"We view the transaction as a distressed exchange because investors will receive less than what was promised on the original securities," S&P credit analyst Michelle Dathorne said in a news release.

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