Moody's downgrades Sheridan

Moody's Investors Service said it downgraded the corporate family ratings on Sheridan Investment Partners II, LP (SIP II), Sheridan Production Partners II-A, LP (Fund II-A) and Sheridan Production Partners II-M, LP (Fund II-M) to Ca from Caa2.

The probability of default ratings also were downgraded to Ca-PD from Caa2-PD, along with the ratings on senior secured loans to Caa2 (LGD 2) from Caa1 (LGD 3).

The outlook is changed to negative from stable.

The ratings follow a request by SIP II to forbear interest payments under its secured bank facilities and loans until the end of July 2019, Moody's explained.

The company said that it is organizing a sale of assets to raise funds to repay all or part of its outstanding debt, the agency noted.

Moody's said it views SIP II's capital structure as unsustainable. As of the end of March 2019, the company was in default under its subordinated unsecured loans and was not in compliance with multiple financial and other covenants under its secured reserve-based loans and term loans, the agency said.

SIP II's credit profile is constrained by its poor asset coverage and weak operating cash flow metrics, Moody's said.

The company's weak liquidity constrains its ability to grow reserves or production, the agency said.

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