S&P downgrades Stone Energy, debt to D

S&P said it lowered its corporate credit rating on Stone Energy Corp. to D from CCC-.

At the same time, the agency lowered its issue-level rating on the company's senior unsecured debt to D from CCC-. The recovery rating is 3H, indicating an expectation of meaningful (high end of the 50% to 70% range) recovery in the event of a payment default.

"The D rating reflects our expectation that Stone Energy will elect to file for Chapter 11 bankruptcy protection rather than make the May interest payment on its 7˝% senior unsecured notes due 2022," S&P credit analyst David Lagasse said in a news release.

The agency’s expectation reflects its assessment that onerous debt maturities and financing costs through 2017, combined with continued weak crude oil and natural gas prices, will result in Stone reorganizing under Chapter 11 protection as a means to restructure its heavy debt and interest expense obligations.

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