S&P cuts HudBay notes to B-

Standard & Poor's said it lowered its recovery rating on HudBay Minerals Inc.'s senior unsecured notes to 3 from 2 following the increase in the size of the company's senior secured revolving credit facility. A 3 recovery rating corresponds with an issue-level rating that is the same as the long-term corporate credit rating on HudBay.

As a result, the agency lowered its issue-level rating on the notes to B- from B.

The B- long-term corporate rating and positive outlook on HudBay are unchanged.

"The downgrade and revision follow the company's announcement that it has increased the size of its revolving credit facility to $300 million from $100 million," S&P credit analyst Jarrett Bilous said in a news release.

Based on its recovery analysis for HudBay, the agency now estimates a higher amount of senior secured debt will be outstanding in its simulated default scenario.

Given that its estimated distressed valuation for the company has not changed from our previous review, S&P said the increase in higher-ranking debt reduces its estimated recovery expectations for senior unsecured noteholders to meaningful (50%-70%, at the high end of the range), which corresponds with a 3 recovery rating and no notching from HudBay’s long-term corporate credit rating.

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