S&P cuts Exterran to negative

Standard & Poor's said it revised the outlook on Exterran Holdings Inc. to negative from stable and affirmed the BB corporate credit rating on the company.

S&P affirmed the BBB- issue rating on Exterran's secured debt. The recovery rating remains 1, indicating the expectation of very high (90% to 100%) recovery for lenders in the event of a default. S&P also affirmed the BB issue ratings on the company's 7¼% senior notes and 4¾% convertible senior notes. The recovery rating on the senior notes is 3, indicating meaningful (50% to 70%) recovery, and the recovery rating on the convertible senior notes is 4, which indicates average (30% to 50%) recovery.

S&P affirmed the B+ rating on Exterran's 4¼% convertible senior notes. The recovery rating is 6, indicating negligible (0% to 10%) recovery.

The ratings on Exterran reflect the company's participation in the highly competitive, capital-intensive natural gas compression services industry; the company's leveraged financial profile; and the master limited partnership structure of Exterran's growing subsidiary Exterran Partners LP, the agency said.

The ratings also incorporate Exterran's exposure to production versus exploration, the company's large share of the domestic contract compression market and its business and geographic diversity, the agency added.

The negative outlook on Exterran is based on the expectation that the consolidated debt-to-EBITDA ratio could stay above 3.5 times through 2011, S&P said. Exterran's operating performance has deteriorated through 2010 and into 2011 because of soft conditions in its North American contract compression business, the agency said.

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