Moody’s ups MEG; rates loans Ba3, notes Caa1

Moody's Investors Service said it upgraded MEG Energy Corp.'s corporate family rating to B3 from Caa2, probability of default rating to B3-PD from Caa2-PD and $1 billion and $800 million senior unsecured note ratings to Caa2 from Caa3.

The agency also assigned a Ba3 rating to MEG's new $1.4 billion first-lien senior secured revolver due 2021 and $1.2 billion term loan due 2023, and a Caa1 rating to the new $750 million second-lien senior secured notes due 2025.

The outlook was changed to stable from negative.

The speculative grade liquidity rating was raised to SGL-1 from SGL-2.

MEG will use the proceeds from the new debt issues to refinance existing debt.

The company also reduced the size of its first-lien revolver to $1.4 billion from $2.5 billion, which will remain undrawn, and extended the maturity date by two years to 2021. Concurrent with the refinancing, MEG will also raise C$357 million of equity. All aspects of these transactions are cross-conditional.

Upon closing of the transactions, Moody's said it will withdraw the ratings on the existing $1.3 billion first-lien term loan due 2020 and $750 million senior unsecured notes due 2021.

"MEG's upgrade to B3 reflects the increasing cash flow in 2017 and 2018 realized by higher oil prices and expected production growth from its infill well project," Moody's assistant vice president Paresh Chari said in a news release.

"The higher cash flow will help to improve MEG's weak credit metrics."

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