Moody’s downgrades Southcross

Moody’s Investors Service said it downgraded Southcross Energy Partners, LP’s corporate family rating to Caa1 from B2, probability of default rating to Caa1-PD from B2-PD and senior secured term loan rating to Caa1 from B2.

The speculative grade liquidity rating also was downgraded to SGL-4 from SGL-3.

The outlook is negative.

Moody’s also said it downgraded Southcross Holdings Borrower LP’s corporate family rating to Caa3 from Caa1, probability of default rating to Ca-PD from Caa1-PD and senior secured term loan rating to Caa3 from Caa1. Its speculative grade liquidity rating also was downgraded to SGL-4 from SGL-3.

The outlook is negative.

The downgrades were prompted by news that Southcross would suspend distributions and hire legal- and financial-advisors to explore strategic alternatives and capital structure matters, Moody’s said.

The ratings also reflect the company’s high financial leverage, limited scale, concentration in the Eagle Ford Shale and an expectation of continued high leverage and challenging industry conditions into 2017, the agency said.

Given the uncertainty around future upstream drilling and spending levels in the Eagle Ford, there is risk that the company may not be able to hit the previously anticipated volume and cash flow targets, Moody’s said.

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