S&P lowers Gavilan loan

S&P said it affirmed its B corporate credit rating on Gavilan Resources LLC.

The outlook is stable.

At the same time, the agency lowered the issue-level rating on the company's $450 million second-lien term loan due 2024 to B+ from BB- and revised the recovery rating to 2 from 1, indicating an expectation of substantial (70% to 90%, rounded estimate: 70%) recovery to creditors in the event of a payment default.

The company provided an updated PV-10 of its year-end 2017 proved reserves using S&P’s recovery price assumptions, leading to a lower assessment of the company's enterprise value in a hypothetical default scenario, the agency said.

S&P said the affirmation reflects a view that the company's credit measures will remain adequate for the agency’s expectations for a B rating over the next two years, with funds from operations to debt in the 20% to 30% range.

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