Moody's: GMX Caa1, notes Caa2

Moody's Investors Service said it assigned GMX Resources Inc. a Caa1 corporate family rating and SGL-3 speculative-grade liquidity rating and its proposed $200 million of senior notes due 2019 a Caa2 rating.

The outlook is stable.

Proceeds from the notes offering and concurrent common equity offering will be used to fund an offer to purchase $50 million of the company's 5% convertible senior notes, repay all outstanding revolver debt, fund the $68.3 million cash portion of the purchase price of its pending Bakken and Niobrara acquisitions and fund a portion of 2011 capital spending.

The ratings reflects GMX's small size, limited diversification, production that is 97% natural gas in a low gas price environment, high leverage on production and reserves and the risks inherent in developing its newly acquired oil focused Bakken and Niobrara acreage while outspending cash flow, Moody's said.

The ratings also consider the potential for improvement in both profitability and diversification if GMX is successful in developing its newly acquired acreage, the pre-funding of the majority of 2011 capital spending through both debt and equity offerings, a lack of required drilling to hold acreage in the company's East Texas properties and hedges in place which add support to realized prices for gas production through 2012, the agency said.

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