S&P downgrades Warren

Standard & Poor’s said it lowered the corporate credit rating on Warren Resources Inc. to SD (selective default) from CCC+.

The agency also said it lowered the ratings on the company’s senior unsecured notes to D from CCC-. The recovery rating on these notes remains at 6, reflecting 0 to 10% expected default recovery.

The downgrade follows the completion of Warren’s exchange of about $70 million of its senior unsecured notes for $47 million of first-lien term loans, S&P said.

The transaction is viewed as a distressed exchange because investors received 65% of par value, less than they were promised on the original securities, the agency said.

About 23% of the senior unsecured note holders participated in the exchange. Concurrent with the exchange, Warren used the remainder of the new $250 million term loan facility to repay the existing revolving credit facility and provide the company with a $30 million delayed draw commitment, S&P said.

The agency also said it believes the company could enter into further debt exchanges as a way to reduce debt leverage.

Further ratings analysis by S&P will incorporate the company’s modestly improved liquidity position, while still taking into account its challenging operating environment and very high debt leverage, the agency added.

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