Moody’s cuts Linn Energy, Berry; rates Linn notes Caa1

Moody's Investors Service said it assigned a Caa1 rating to Linn Energy, LLC's (LINE) proposed second-lien secured notes and downgraded the corporate family rating to Caa1 from B2, probability of default rating to Caa3-PD from B2-PD and unsecured notes ratings to Caa3 from B3.

The agency also downgraded the senior unsecured notes ratings of Berry Petroleum Co. to Caa2 from B3.

At the same time, Moody's affirmed Linn Energy’s speculative grade liquidity rating at SGL-3.

The outlooks remain negative.

The actions were taken in response to Linn Energy’s announcement of a new second-lien financing transaction. Moody's considers Linn's pending retirement of $2 billion of its existing unsecured notes in exchange for $1 billion of new second-lien debt as a distressed exchange for its senior unsecured debt, which is an event of default under Moody's definition of default.

Upon closing of the second lien financing, Moody's will append Linn Energy’s probability of default rating with an /LD designation indicating limited default, which will be removed after three business days.

"The downgrade of LINE's ratings reflect elevated distressed exchange risk going forward at the company. While LINE's second lien financing helps to improve the company's leverage metrics, further debt reduction is necessary in order to improve asset coverage of debt as the company's hedge book continues to roll off into materially lower commodity prices," Moody's vice president Gretchen French said in a news release.

"In addition, the additional secured debt further subordinates LINE's unsecured debt."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.