S&P Downgrades Key Energy Services (KEG) to 'CC'; Outlook is Negative

S&P Global Ratings today lowered its corporate credit rating on Key Energy Services Inc. (NYSE: KEG) to 'CC' from 'CCC-'. The outlook is negative.

In addition, we lowered our issue-level rating on the company's senior secured term loan to 'CC' from 'CCC+'. The recovery rating on the term loan remains '1', indicating very high (90% to 100%) recovery in the event of payment default. The rating on the company's senior unsecured notes remains 'C' with a recovery rating of '6' indicating negligible (0% to 10%) recovery in the event of payment default.

"The downgrade follow's Key's disclosure that it entered into confidential agreements with certain holders of its 6.75% senior notes due 2021 and certain lenders of the term loans regarding a financial restructuring," said S&P Global Ratings credit analyst David Lagasse.

The company announced today that the discussions remain ongoing with both sides presenting proposals. Based on the disclosure filed in the SEC Form 8K on June 15, 2016, we believe a filing under Chapter 11 of the U.S. bankruptcy code will be forthcoming.

The outlook is negative, reflecting the high likelihood that Key will seek to restructure its debt through a prepackaged Chapter 11 proceeding once it comes to terms with creditors.

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