S&P downgrades Goodrich convertibles

Standard & Poor's said it lowered the corporate credit rating on Goodrich Petroleum Corp. to SD (selective default) from B-.

The agency also said it lowered the rating on the company's 5% senior unsecured convertible notes due in 2032 to D from CCC.

S&P also said it affirmed the CCC rating on the company’s senior unsecured notes due 2019 and convertible notes due 2026 and 2029. The recovery rating on the senior unsecured notes remains at 6, reflecting 0 to 10% expected default recovery.

The agency also said it affirmed the CCC+ rating on the company's senior secured second-lien notes due 2018. The recovery rating on the senior secured second-lien notes remains at 5, reflecting 10% to 30% expected default recovery.

The downgrades follow news that Goodrich reached an agreement with holders of portions of its senior unsecured convertible notes to exchange the notes for new senior unsecured convertible notes, S&P said.

The noteholders agreed to receive about $27.5 million of new senior unsecured convertible exchange notes due 2032 for about $55 million of existing unsecured convertible notes due 2032, the agency said.

Pro forma for the exchange, S&P said it projects the company’s debt-to-EBITDA to be about 5.5x at the end of 2015 and reach more than 9x in 2016.

This transaction is considered a distressed exchange because investors will receive less than what was promised on the original securities, the agency said.

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