S&P cuts Walter Energy, debt

Standard & Poor's said it lowered its corporate credit rating on Walter Energy Inc. to D from CCC- and its issue-level ratings to D.

The recovery rating on the senior secured debt is 2, which indicates an expectation for recovery at the lower half of the substantial (70% to 90%) recovery range.

The recovery rating on the second-lien debt and the senior unsecured obligations is 6, which indicates an expectation for negligible (0% to 10%) recovery.

S&P said it lowered the ratings after Walter Energy elected not to pay about $19 million in aggregate interest payments on its 9 7/8% senior notes due 2020.

A payment default has not occurred under the indentures governing the notes, which provide a 30-day grace period. However, the agency considers a default to have occurred because it does not expect a payment to be made within the stated grace period given the company's heavy debt burden, which it views to be unsustainable.

In S&P’s opinion, the company will exhaust its sources of liquidity within six months. Cash and investments totaled roughly $435 million on March 31.

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