S&P cuts MD America to SD, loan to D

S&P said it lowered its corporate credit rating on MD America Energy LLC to SD (selective default) from CCC.

The agency also downgraded the issue-level rating on the company's term loan to D from CCC. The recovery rating is 3, indicating an expectation of meaningful (50% to 70%, high end of the range) recovery in the event of a default.

"The downgrade reflects MDAE's announcement that it is redeeming its term loan due 2019 at 94% to par with proceeds from an equity infusion from its parent company Meidu Energy Corp.,” S&P credit analyst Christine Besset said in a news release.

"We view the transaction as distressed because debtholders will receive less than par, and because we believe that MDAE's leverage was unsustainable given our expectation of deteriorating cash flow generation."

The agency said it expects to reassess the corporate credit rating within the next few days, once the term loan has been repaid in full.

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