S&P lowers Sheridan Fund I

S&P said it lowered its long-term issuer credit ratings on Sheridan Production Partners I-A, Sheridan Investment Partners I and Sheridan Production Partners I-M (collectively referred to as "Sheridan Fund I") to CCC- from CCC+.

At the same time, S&P lowered its issue ratings on both the first-lien senior secured term loan and the revolving credit facilities to CCC+ from B. The recovery rating remains 1, indicating expectations for very high (90% to 100%, rounded estimate: 95%) recovery in the event of a payment default.

S&P said it is placing all ratings on CreditWatch with developing implications.

“The downgrade reflects the possibility that Sheridan I will extend its remaining debt maturities to match the 2022 fund life and the negotiation of terms with its creditors,” S&P said in a news release.

“The company announced an agreement to divest its assets in the South Central Oklahoma Oil Province (SCOOP) play for $264 million, and it plans to use a substantial portion of the proceeds for debt repayments (which currently total $620 million). The company is evaluating potential options to address its 2019 debt maturities, which may include an extension of its debt maturities by the expected close of this divestiture in December, which increases the probability that Sheridan I will commence a distressed exchange, in our view.”

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