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S&P downgrades Midstates
Standard & Poor’s said it lowered the corporate credit rating on Midstates Petroleum Co. Inc. to CCC- from CCC+.
The agency also said it lowered the rating on the company’s second-lien debt to CCC from B-. The recovery rating is 2, indicating 70% to 90% expected default recovery.
S&P also said it lowered the ratings on the company’s third-lien and senior unsecured debt to C from CCC-. The recovery rating is 6, indicating 0 to 10% expected default recovery.
The outlook is negative.
The downgrades reflect the risk that Midstates Petroleum could elect to file for Ch. 11 following the draw-down on its credit facility, the agency said.
As a result of the draw, S&P said it expects Midstates to trip its 1x first-lien leverage covenant under its reserve-based lending facility – this is based on a 2016 forecast for EBITDA of less than $150 million.
The company could skip its next interest payment on its 10¾% senior unsecured notes due April 1, 2016, the agency said.
Additionally, S&P said it expects the borrowing base on the company’s reserve-based lending facility to decrease in the spring, which will cause the company to be overdrawn.
The negative rating outlook reflects the likelihood the company could default on its debt, including the April interest payment, the agency said.
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