S&P downgrades Energy XXI

Standard & Poor's said it lowered Energy XXI (Bermuda) Ltd.'s corporate credit rating to SD (selective default) from CC and the issue-level ratings of operating subsidiary Energy XXI Gulf Coast Inc. to D from CC.

The ratings were removed from CreditWatch with negative implications.

The downgrade follows the completion of Energy XXI Gulf Coast's exchange offer for approximately 46% of its $750 million 10% senior notes due 2013, with holders receiving 16% second-lien junior secured notes due 2014 representing 80% of par. The agency said it considers the completion of the exchange offer to be tantamount to a default.

S&P will assign a new corporate credit rating to Energy XXI (Bermuda) soon. It said that although the tender offer and private placement of additional 16% notes should result in modest deleveraging, the agency's preliminary expectation is that the corporate credit rating it assigns will likely not be higher than B- and that Energy XXI will remain highly leveraged at a time of continued commodity price uncertainty.

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