S&P assigns Callon notes B

S&P said it gave B issue and 2 recovery ratings to Callon Petroleum Co.’s planned $600 million of senior unsecured notes due 2030. The 2 recovery rating indicates substantial (70%-90%; rounded estimate: 85%) recovery in default. Additionally, the agency placed Callon’s ratings, including its B- issuer rating, on CreditWatch with positive implications.

Callon will use the proceeds and revolver draws to redeem its 9% second-lien notes due 2025 and its 6 1/8% unsecured notes due 2024.

“The CreditWatch placement reflects the possibility of an upgrade following the close and funding of Callon's unsecured notes offering. The refinancing transaction would significantly improve its debt maturity profile and likely pave the way for an extension of the revolving credit facility (currently set to expire in December 2024) later this year. We also believe Callon will use free operating cash flow generated for the remainder of 2022 primarily to repay outstanding borrowings on the facility,” S&P said in a press release.

The agency said it expects to resolve the positive watch shortly after the deal closes.

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