S&P downgrades Seventy Seven Energy

Standard & Poor’s said it lowered the corporate credit rating on Seventy Seven Energy Inc. to CC from CCC-.

The outlook is negative.

The agency also said it lowered the ratings on the company’s secured term loan to CCC from CCC+ and unsecured notes to CC from CCC-.

The rating on the structurally subordinated unsecured notes remains at C.

The recovery rating on the senior secured loans remains at 1, indicating 90% to 100% expected default recovery.

The recovery rating on the senior unsecured notes remains at 3, indicating 50% to 70% expected default recovery.

The recovery rating on the subordinated notes remains at 6, indicating 0 to 10% expected default recovery.

The downgrades follow news that the company entered into a restructuring support agreement with certain lenders of its incremental term supplement loan, currently representing 92% of the aggregate outstanding principal amount and noteholders controlling more than 57.7% of the outstanding principal amount of the company’s 6 5/8% senior unsecured notes due 2019, S&P said.

Pursuant to the agreement, the noteholders agreed to support a de-leveraging transaction under which the company will convert about $1.1 billion of outstanding notes to new common equity, the agency added.

The company intends to commence a prepackaged Ch. 11 filing on or before May 26 to implement the plan, S&P said.

The negative outlook reflects the company’s plans to file Ch. 11 proceedings, the agency said.

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