S&P lowers EP Energy, rates notes BB-

S&P said it lowered the rating on EP Energy LLC's priority-lien term loan to B from B+ and revised the recovery rating to 4 from 2.

The recovery rating indicates 30% to 50% expected default recovery.

Because there is already limited cushion at the 4 recovery rating if EP Energy upsizes the proposed senior note offering from the initial $350 million, S&P said it could consider revising the recovery expectation downward and lowering the rating on the term loan.

The agency also said it assigned a BB- rating to EP Energy's proposed $350 million senior secured notes due 2023 with a recovery rating of 1, indicating 90% to 100% expected default recovery.

The proceeds will be used to pay down a portion of the existing reserve-based facility and for general corporate purposes, S&P said.

The downgrade follows news that EP Energy plans to issue $350 million of senior secured notes due 2023, which will rank senior to the priority-lien term loan due 2021 in the capital structure, the agency said.

The recovery and issue-level ratings for the remaining second-lien secured term loans and senior unsecured debt are unchanged at 6 and CCC+, respectively.

The B corporate credit rating and negative outlook are unaffected.

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