S&P rates California Resources loans BBB, notes BB

Standard & Poor’s said it assigned its BB+ corporate credit rating to California Resources Corp. The outlook is stable.

S&P also assigned a BBB issue-level rating to the company’s $2 billion revolving credit facility due in 2019 and its planned $1 billion term loan facility due 2019. The recovery rating on the revolver and term loan facility is 1, reflecting an expectation for very high (90% to 100%) recovery in the event of a payment default.

S&P also assigned a BB issue-level rating to the company’s proposed $5 billion senior unsecured debt issuance (tranche sizes are still to be determined, but the debt will be issued in three separate tranches with tenors of five and a half years, seven years and 10 years). The recovery rating on this unsecured debt is 5, indicating an expectation of modest (10% to 30%) recovery in the event of a payment default.

“We believe that increased capital spending as a stand-alone entity will enable the company to drive high-single-digit production growth over the next two years, led by higher investment in mature, lower-risk crude oil plays,” said S&P credit analyst Mark Salierno in a news release. “We expect CRC’s cash flow generation will sufficiently support its capital spending plans.”

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