EP Energy LLC Downgraded To 'CC' From 'CCC-' On Deferred Interest Payment; Outlook Negative

  • U.S.-based exploration and production company EP Energy LLC has announced that it has elected to use the 30-day grace period expiring Sept. 14, 2019, for the coupon payment on its 1.5-lien senior secured notes due 2025.
  • The company is currently negotiating with its debtholders regarding a capital restructuring.
  • We are lowering our long-term issuer credit rating on EP Energy to 'CC' from 'CCC-'. In addition, we are lowering our issue-level ratings on the company's 1.125- and 1.25-lien senior secured debt to 'CCC' from 'CCC+'.
  • We are affirming our 'C' issue-level rating on the 1.5- and second-lien senior secured debt and the unsecured notes.
  • The negative outlook reflects the likelihood we will lower the issuer credit rating to 'D' or 'SD', should the company elect not to pay the coupon payment within the 30-day grace period or engage in a distressed exchange or capital restructuring.
CENTENNIAL (S&P Global Ratings) Aug. 16, 2019—S&P Global Ratings today took the rating actions listed above. The downgrade follows EP Energy's announcement that it has decided to defer the coupon payment on its 8% 1.5-lien senior secured notes maturing 2025 ($1 billion outstanding as of June 30, 2019). The payment due date was Aug. 15, 2019, and EP Energy is using the 30-day grace period provided in the notes' indenture because it is in the process of evaluating certain alternatives; including structured financings, restructurings, exchanges, and chapter 11 filings.
The negative outlook reflects the likelihood that we will lower the issuer credit rating on EP Energy to 'D' if the company does not pay the coupon within the 30-day grace period or files for chapter 11 bankruptcy or 'SD' (selective default) if the company engages in a restructuring of its debt.
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