$3.25 billion of rated debt affected
New York, March 02, 2015 -- Moody's Investors Service (Moody's) downgraded Samson Investment
Company's Corporate Family Rating (CFR) to Caa3 from B3.
Moody's also downgraded the company's senior unsecured notes
to Ca from Caa1 and its second-lien term loan to Caa2 from B2.
The SGL-4 Speculative Grade Liquidity Rating is affirmed and the
outlook is negative. These rating actions conclude Moody's review
for downgrade of Samson Investment Company, which was initiated
on December 12, 2014. Samson Investment Company is the principal
operating subsidiary of Samson Resources Corporation (Samson).
"The downgrade to Caa3 reflects our view that Samson faces a high
risk of default," commented Andrew Brooks, Moody's
Vice President. "The company's stressed liquidity position,
delays in reaching agreements on potential asset sales and its retention
of restructuring advisors increases the possibility that the company may
pursue a debt restructuring that Moody's would view as a default."
Downgrades:
Corporate Family Rating (Local Currency), Downgraded to Caa3 from
B3
Probability of Default Rating, Downgraded to Caa3-PD from
B3-PD
Senior Secured Bank Credit Facility, Downgraded to Caa2(LGD3) from
B2(LGD3)
Senior Unsecured Regular Bond/Debenture, Downgraded to Ca(LGD5)
from Caa1(LGD5)
Affirmations:
Speculative Grade Liquidity Rating, Affirmed SGL-4
Outlook Actions:
Changed To Negative From Rating Under Review
RATINGS RATIONALE
Chronically low natural gas prices exacerbated by suddenly weaker crude
oil prices have pressured Samson's near term cash flow, stressing
its liquidity and limiting opportunities for debt reduction. While
the company has made modest progress furthering the development of its
oil and liquids-rich natural gas holdings, this strategy
presently does not generate cash flow sufficient to adequately fund its
ongoing oil and gas production activities, requiring the company
to shift its focus to asset sales to supplement its liquidity.
However, the current commodity price environment has not been conducive
for assets sales and this process appears to have now stalled.
Samson is also burdened with exceptionally heavy debt service costs relative
to cash flow as a result of its high coupon debt, further pressuring
liquidity.
Samson has retained restructuring advisors to assist in the evaluation
of all aspects of its capital structure and untenable interest burden.
Moody's considers Samson's present debt level unsustainable,
heightening the risk that Samson may need to reach a negotiated agreement
to reduce its outstanding debt and interest expense, which Moody's
would view as equivalent to a default.
Samson's Caa3 CFR reflects margins, cash flow and liquidity
that have become increasingly stressed by low commodity prices and an
over-leveraged balance sheet, raising concerns over the sustainability
of the company's capital structure. The company is a large,
predominantly natural gas producer that operates across a geographically
diverse set of producing basins, few of which, however,
offer compelling value in the current commodity price downturn.
Samson's SGL-4 Speculative Grade Liquidity Rating reflects its
weak liquidity through 2015. With $567 million drawn under
its $1.0 billion secured borrowing base revolving credit
facility at September 30, availability of the unused amount of the
revolver could become restricted should Samson be unable to comply with
the facility's 1.5x first lien debt to EBITDA covenant, which
we view as likely. The revolver has a scheduled maturity date of
December 2016. In May 2014, Samson's revolving credit agreement
was amended to reduce its borrowing base to $1.0 billion
from $1.78 billion, while permitting it to incur an
additional $500 million of second lien debt without a further,
related reduction to the borrowing base. The second lien debt was
not issued.
The Ca rating on Samson's $2.25 billion senior unsecured
notes reflects the subordination of the senior unsecured notes to Samson's
$1.0 billion senior secured revolving credit and its $1.0
billion second lien term loan's priority claim to the company's assets.
The size of the claims relative to Samson's outstanding senior unsecured
notes results in the notes being rated one notch below the Caa3 CFR under
Moody's Loss Given Default Methodology. The Caa2 rating on Samson's
$1.0 billion second lien term loan reflects its superior
position in the capital structure compared to the unsecured notes and
its second priority lien on all collateral securing the secured revolving
credit facility.
The outlook is negative reflecting stressed liquidity. A downgrade
would be considered if Samson's liquidity profile further deteriorates
or should it pursue a distressed exchange of its debt. An upgrade
could be considered should Samson materially improve its liquidity,
and should higher natural gas and crude oil prices support increased cash
flow generation.
The principal methodology used in these ratings was Global Independent
Exploration and Production Industry published in December 2011.
Other methodologies used include Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009. Please see the Credit Policy page
on www.moodys.com for a copy of these methodologies.
Samson Resources Corporation is a privately owned independent exploration
and production company headquartered in Tulsa, Oklahoma.
Samson was acquired in December 2011 by a Kohlberg Kravis Roberts &
Co. L.P. (KKR)-led investor group for $7.2
billion in which KKR holds a 55% stake.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Andrew Brooks
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Steven Wood
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades Samson's corporate family rating to Caa3
