Moody’s pares rating on Centerbridge-backed Seitel

Seitel Inc, the Houston provider of underground mapping for fossil-fuel exploration and production, did not cover its $6 million in interest expense in the first quarter with its EBITDA, prompting a downgrade from Moody’s Investors Service.

With $256 million in loans outstanding and revenue declining, the portfolio company of Centerbridge Partners LP faces a high level of debt in relation to its tangible asset base, with a volatile outlook on its seismic-data business, Moody’s said.

During a period of low oil prices and a pullback in oil-and-gas drilling, Seitel’s EBITDA fell to $17 million in the 12 months ended March 31, from a high of $115 million in 2011.

“The low commodity price environment and depressed North American drilling activity will continue to pressure Seitel’s cash EBITDA generation and result in weak coverage of interest in 2016,” Moody’s analyst James Wilkins said in a June 15 research note.

On the plus side, Seitel benefits from a significant market positions, strong margins and flexible cost structure, he said.

Moody’s downgraded Seitel’s corporate-family rating to Caa2 from Caa1; its senior unsecured notes due 2019 were also cut to Caa2.

Debt rated Caa is judged to be speculative of poor standing and subject to very high credit risk, according to Moody’s definitions.

Centerbridge bought Seitel Inc for $125 million in cash in 2011 from ValueAct Capital LLC, a hedge fund, as an early investment from its Centerbridge Capital Partners II LP fund. The fund closed at $4.4 billion, ahead of its $3.75 billion target, in 2011.

Centerbridge didn’t return a request for comment.

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