S&P rates Forbes Energy notes B-

Standard & Poor's said it assigned a CCC+ corporate credit rating to Forbes Energy Services Ltd. and placed the rating on CreditWatch with positive implications. S&P removed the corporate credit rating on Forbes Energy Services LLC, a subsidiary of Forbes Ltd.

S&P assigned a preliminary B- issue rating to Forbes Ltd.'s proposed $255 million of senior notes. The recovery rating is 4, indicating the expectation of average (30% to 50%) recovery in a payment default.

The ratings on the existing $205 million second-lien notes due 2015 remain unchanged. The notes will be fully repurchased through a tender offer.

The positive CreditWatch listing reflects the potential for significantly improved liquidity resulting from a proposed $75 million senior secured credit facility, contingent upon the sale of the proposed $255 million of senior notes, the agency said.

The company will use proceeds from the $255 million of notes to help fund the tender offer for the existing $192.5 million of senior secured notes due 2015 and $20 million of first-lien notes due 2014.

The rating actions also reflect the robust industry conditions supporting Forbes' improved EBITDA and cash flow generation, the agency added. Nevertheless, improving credit quality is limited by Forbes still high debt leverage and related interest expense burden.

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