S&P Downgrades Stone Energy (SGY) to 'D'

S&P Global Ratings lowered its corporate credit rating on Stone Energy Corp. (NYSE: SGY) to 'D' from 'CC'.

At the same time, we lowered our issue-level rating on the company's senior unsecured debt to 'D' from 'CC'. The recovery rating is '3', indicating our expectation of meaningful (low end of the 50% to 70% range) recovery in the event of a payment default.

"The 'D' rating reflects our expectation that Stone Energy will elect to file for Chapter 11 bankruptcy protection rather than make the November interest payment on its 7.5% senior unsecured notes due 2022," said S&P Global Ratings credit analyst David Lagasse.

The company had previously announced Oct. 21, 2016, that it entered into a restructuring support agreement with certain holders of its unsecured notes and that the company expects to file for voluntary relief under Chapter 11 on or before Dec. 9, 2016. We expect Stone's onerous debt maturities and financing costs through 2017, combined with continued weak crude oil and natural gas prices, will result in Stone reorganizing under Chapter 11 protection as a means to restructure its heavy debt and interest expense obligations.

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