S&P Downgrades Atlas Resource Partners (ARP) to 'D' Amid Deferred Interest Payment

• U.S.-based oil and gas exploration and production company Atlas Resource Partners L.P. has stated that it has deferred its semiannual interest payment due July 15, 2016, on its 7.75% senior unsecured notes due 2021.
• The company has a 30-day grace period after the interest payment date to make the payment before an event of default occurs. We do not expect Atlas to make this interest payment within the grace period, and do not believe it will meet its other financial obligations.
• The company is continuing to negotiate with holders of its outstanding senior notes as well as lenders of its revolving credit facility regarding a potential restructuring.
• We are lowering our corporate credit rating to 'D' from 'CCC-' and lowering the issue-level rating on the company's senior unsecured debt to 'D' from 'C' with a recovery rating of '6'.

S&P Global Ratings lowered its corporate credit and issue-level ratings on Atlas Resource Partners L.P. (NYSE: ARP) to 'D' from 'CCC-' and 'C', respectively. The recovery rating on the company's senior unsecured debt remains '6', indicating our expectation of average (0%-10%) recovery in the event of a payment default.

"The downgrade reflects our view of Atlas' decision to defer its July 15, 2016, interest payments on its 7.75% senior unsecured notes due 2021," said S&P Global Ratings credit analyst Aaron McLean. "The company has a 30-day grace period after the interest payment date to make the payment before an event of default occurs," he added.

The company continues to negotiate with bondholders at this time. Additionally, the company has entered into a forbearance agreement until July 27, 2016, with lenders of its revolving credit facility deferring the first of four equal installment payments required to cure the current $143.7 million deficiency. We believe it is highly unlikely that the company will make the interest payment on the 7.75% notes within the 30-day grace period and the installment payment on its borrowing base deficiency, and believe a general default is the most likely outcome.

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