Fitch downgrades SM Energy

Fitch Ratings said it downgraded the issuer default rating for SM Energy Co. to B- from B+, the senior secured revolver to BB-/RR1 from BB+/RR1 and the senior unsecured notes to B-/RR4 from BB-/RR3. The agency placed the ratings on rating watch negative.

The downgrade reflects the effect on earnings and liquidity from the recent decline in oil and natural gas prices and Fitch’s expectations the downturn may be deep and lengthy. Based on current guidance and Fitch’s revised price deck, Fitch said it expects SM to generate free cash flow deficits and elevated leverage metrics that could weaken liquidity measures due to borrowing base revisions and incremental borrowings.

The rating watch negative reflects the challenges of operating in a low commodity price environment with a material maturity wall. Also, there is a possibility financial covenants could be breeched and liquidity could be further tightened in an event of a cure, the agency said.

© 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.