Fitch sees giving Ascent Resources, notes B, loans BB, BB-

Fitch Ratings said it expects to assign a long-term issuer default rating of B with a stable outlook to Ascent Resources Utica Holdings, LLC at the time of transaction close. Also, Fitch expects to rate Ascent’s first lien senior secured revolver BB/RR1, second-lien secured loan BB-/RR2 and the senior unsecured notes B/RR4.

Ascent proposes to exchange the $925 million of senior unsecured notes due 2022 outstanding for $538 million of a new second-lien term loan due 2025 and $387 million of unsecured notes due 2027, which will also contain contingent value rights. The exchange will be on a pro rata basis.

“The ratings assume a revised debt structure that is expected to be in place following the exchange offers. Once the transaction takes place, and the debt is issued, the expected ratings will be replaced by final ratings. Fitch notes that the rating is more prospective than historical since more weight is applied to the expectation of material FCF generation and its use to enhance liquidity and reduce debt,” the agency said in a press release.

The exchange pushes the next material debt maturity to 2024. “The ratings also reflect the expectation of positive FCF over the rating horizon, with proceeds being applied to reduce debt, moderate leverage, average production scale and robust hedge book that mitigates downside price risk,” Fitch said.

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