S&P rates Gran Tierra notes B

S&P said it rated Gran Tierra Energy Inc.’s planned 8¾ proposed amortizing senior secured bond due 2029 B. Gran Tierra is aiming for more than 80% acceptance from current bondholders to exchange their stake for the new 8¾% senior secured notes with equal amortizations in 2027, 2028 and 2029.

The agency also revised the company’s outlook to positive from stable and affirmed its B ratings on the company and its senior unsecured debt and placed it on CreditWatch with negative implications given higher risk of subordination in the next 90 days.

“While we assigned a B rating to the proposed senior secured bond, if this transaction is successfully executed, the current unsecured notes will be automatically subordinated. As a result, we will lower the rating on those notes to B- from B. We expect to resolve the CreditWatch with negative implications within the next 90 days when we have more information about the transaction,” S&P said in a press release.

“We think that GTE will keep benefiting from rising crude oil prices that have allowed for higher operating netbacks of about $67.1 per barrel in the first quarter of 2022 (versus $34.7 per barrel in 2021), equivalent to a 78.7% margin (versus a 66.4% margin in 2021). On the other hand, the company has reduced its liability exposures by partially repaying its revolving credit facility (RCF) through own cash generation and is achieving faster deleveraging than we expected,” S&P said in a press release.

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