S&P Cut LINN Energy (LINE) to 'D' Following Missed Interest Payment
Standard & Poor's Ratings Services today lowered its corporate credit ratings on oil and gas exploration and production company LINN Energy (Nasdaq: LINE) and its subsidiary Berry Petroleum Co. LLC to 'D' from 'CCC'.
We lowered the issue-level rating on the company's second-lien debt to 'D' from 'CCC-' and removed the rating from CreditWatch, where we placed it with negative implications on Feb. 4, 2016. The recovery rating on the second-lien debt remains '5', indicating our expectation of modest (10% to 30%, higher end of the range) recovery in the event of default. We also lowered the rating on the company's unsecured debt to 'D' from 'CC'. The recovery rating remains '5', indicating our expectation of negligible (0%-10%) recovery in the event of default.
At the same time, we lowered the issue-level rating on subsidiary Berry Petroleum's senior unsecured debt to 'D' from 'CCC-'. The recovery rating remains '5', indicating our expectation of modest (10% to 30%, lower end of the range) recovery in the event of a default.
"The 'D' rating reflects Linn Energy's announcement that it has elected not to make the interest payment on its 7.75% senior notes due 2021, 6.5% senior notes due 2021, and subsidiary Berry Petroleum's senior notes due 2022, and our belief that the company will not make this payment before the 30-day grace period ends," said Standard & Poor's credit analyst Michael Tsai.
The company is also currently in default under their credit facility due to the inclusion of a going concern explanation by the company's auditors in its consolidated financial statements. We believe the company will likely reorganize under Chapter 11.