$275 million of new debt rated
New York, April 24, 2017 -- Moody's Investors Service ("Moody's") upgraded Bill Barrett Corporation's
("Bill Barrett") Corporate Family Rating (CFR) to Caa1 from Caa2 and its
existing senior unsecured notes' ratings to Caa2 from Caa3. The
SGL-3 Speculative Grade Liquidity Rating was affirmed and the rating
outlook remains stable.
"The upgrade of Bill Barrett's ratings is driven by the reduction of default
risk supported by the company's large cash balance and improved debt maturity
profile," said Prateek Reddy, Moody's lead analyst.
"The company's credit metrics are likely to soften in 2017 because of
the roll off of higher priced hedges, but the metrics should strengthen
along with production growth in 2018."
Concurrently, Moody's assigned a Caa2 rating to the company's proposed
$275 million senior notes offering. Proceeds from the new
notes issuance and approximately $52 million of balance sheet cash
will be used to fully redeem the existing $315 million of 7.625%
senior notes due 2019, $0.6 million of the 5%
convertible notes due 2028 and to fund $11 million of tender premiums
and transaction related fees and expenses.
The rating of the existing 7.625% senior notes due 2019
will be withdrawn upon their complete redemption following the close of
the proposed senior notes offering.
Rating Actions:
...Corporate Family Rating, upgraded to Caa1
from Caa2
...Probability of Default Rating, upgraded
to Caa1-PD from Caa2-PD
...$315.3 Million Backed Senior Unsecured
Notes due 2019, upgraded to Caa2 (LGD4) from Caa3 (LGD4)
...$400 Million Backed Senior Unsecured Notes
due 2022, upgraded to Caa2 (LGD4) from Caa3 (LGD4)
...$275 Million Backed Senior Unsecured Notes
due 2025, assigned at Caa2 (LGD4)
...Speculative Grade Liquidity Rating, affirmed
at SGL-3
...Outlook, remains Stable
RATINGS RATIONALE
Bill Barrett's Caa1 CFR incorporates expectations for the softening of
2017 credit metrics because of the roll off of higher priced hedges and
minimal production growth following low capital spending in 2016.
Ratings also reflect the company's small scale, oil-focused
production profile and a reserve base that is exposed to single-basin
concentration risk. The rating is supported by the modest easing
of default risk driven by the improvement in liquidity from an asset sale
and equity issuance in 2016. The company now has adequate liquidity
to fund its capital spending program that will contribute to meaningful
production growth and some strengthening of credit metrics in 2018.
Bill Barrett's senior notes, including the proposed $275
million senior notes, are rated Caa2, one notch below the
Caa1 CFR. The one notch difference reflects the meaningful size
($300 million of commitments and borrowing base) of the priority-claim
secured borrowing base revolving credit facility compared to unsecured
debt in the capital structure.
Bill Barrett's SGL-3 Speculative Grade Liquidity Rating reflects
expectations for an adequate liquidity profile through mid-2018.
Pro forma for the senior notes issuance, Bill Barrett will have
about $225 million in cash and almost full availability under the
$300 million revolving credit facility (except for $26 million
of letters of credit outstanding). The revolver commitments expire
in 2020 and the credit agreement has three financial maintenance covenants
- a minimum current ratio of 1.0x, a maximum secured
debt leverage ratio of 2.5x, and a minimum interest coverage
ratio of 2.5x. The company will likely comply with the covenants
but the interest coverage ratio headroom will likely tighten in the second
half of 2017 before improving in 2018. The company's ability to
generate cash from asset sales is limited, but it did raise cash
by issuing equity in late 2016.
The stable outlook reflects Moody's expectation for Bill Barrett to grow production,
modestly improve credit metrics, and to comply with the covenants
over the next 12 months.
Bill Barrett's ratings could be downgraded if production begins to decline,
retained cash flow (RCF) to debt drops to under 5% or EBITDA to
interest falls below 2.5x.
Ratings could be upgraded if Bill Barrett grows production in a capital
efficient manner. RCF to debt sustained above 15%,
leverage full cycle ratio approaching 1x, EBITDA to interest above
4x and maintenance of adequate liquidity could support a ratings upgrade.
Bill Barrett is a Denver, Colorado based independent exploration
and production company with operations focused in the Rocky Mountain region.
The principal methodology used in these ratings was Global Independent
Exploration and Production Industry published in December 2011.
Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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.
Prateek Yanati Reddy
Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Russell Solomon
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
