S&P assigns BB- to WPX notes, on watch

S&P said it assigned its BB- issue-level rating and 3 recovery rating to WPX Energy Inc.’s proposed $900 million of senior unsecured notes. The 3 recovery rating indicates S&P’s expectation for meaningful (50%-70%; rounded estimate: 65%) recovery of principal in the event of a payment default. The notes will rank equally with the company’s outstanding senior unsecured notes.

At the same time, the agency placed its BB- issue-level rating on the notes on CreditWatch with positive implications to reflect the likelihood S&P will upgrade WPX pending the close of its Felix Energy acquisition.

WPX will use the proceeds to partially fund its previously announced $2.5 billion acquisition of Felix Energy. However, if the deal does not close as anticipated the notes will be subject to a mandatory redemption by the company at 100% of the initial issuance price plus any accrued and unpaid interest.

On Dec. 17, S&P placed all its ratings on WPX, including the BB- issuer credit rating, on CreditWatch with positive implications following the company’s announcement of its intention to acquire Felix Energy. “The CreditWatch positive placement reflects the likelihood that we will upgrade WPX following the close of its acquisition of Felix Energy based on the combined company’s larger size and scale,” said S&P in a press release.

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