S&P: Milagro defaults on notes, loan

Standard & Poor's said it lowered the corporate credit and debt ratings on Milagro Oil and Gas Inc. to D from CC, indicating a default on the company's $250 million senior notes.

S&P also said it revised the recovery rating on the notes to 1 from 3.

The downgrade reflects Milagro's missed interest payment on its $250 million senior secured second lien notes due 2016.

The payment was due Nov. 15 and the 30-day grace period provided by the indenture expired Dec. 16, S&P said.

The higher recovery rating on Milagro's second-lien notes reflects the relatively high level of the company's year-end 2012 SEC PV10 valuation compared with the company's outstanding first-lien and second-lien debt, the agency said.

"Milagro's revolving credit facility is also subject to a cross-default provision, which means that the company is in technical default on its bank debt following the default on the notes," said Christine Besset, an S&P analyst.

At the end of June 2013, the company had $133.5 million drawn under its $135 million revolving credit facility, Besset said in a press release.

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