S&P rates MEG notes BB-

S&P said it assigned its BB- issue-level rating and 2 recovery rating to MEG Energy Corp.’s proposed $800 million issuance of senior unsecured notes due 2027. The 2 recovery rating indicates an expectation of substantial (capped at 70%-90%; estimated recovery of 85%) recovery in a simulated default scenario.

MEG intends to use the proceeds to fully repay its 6 3/8% $800 million unsecured notes due 2023. The new notes will rank pari passu with the 2024 unsecured notes. Concurrent with the refinancing transaction, the company plans to repay $100 million of its original $750 million secured notes due 2025 from cash on hand.

All other ratings on MEG are unchanged. Tuesday, S&P revised its outlook on MEG to stable from negative, based primarily on an expectation of improving credit metrics, with estimated funds from operations-to-debt of 15%-18% for 2020-2021.

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