S&P cuts Perpetual Energy

S&P Global Ratings said it lowered its long-term corporate credit rating on Perpetual Energy Inc. to CC from CCC. The outlook is negative.

At the same time, S&P lowered its issue-level rating on the company's senior unsecured notes to C from CC and revised the recovery rating on the debt to 5 from 6, indicating an expectation of modest recovery (10% to 30%; in the high end of the range) in the event of a default.

S&P said the downgrade follows Perpetual's announcement that it has launched a securities swap proposal to existing holders of its 8¾% senior unsecured notes (both due 2018 and 2019) for a new 8¾% senior unsecured note due 2021. The company is offering an increased annual interest rate for the first year, and only for the first year, that the exchange senior notes are outstanding of 9¾% instead of 8¾%, which is equal to $10 per $1,000 principal amount of existing senior notes validly tendered under the note exchange proposal.

“In our view, even with the additional compensation, the noteholders will receive less than the original promised on the original securities, which would characterize a distressed exchange offer,” said S&P credit analyst Michelle Dathorne in a news release.

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