As usual, we have a week’s worth of ratings actions on the debt of private equity-backed companies from Standard & Poor’s and Moody’s Investor Services. This week was a good one for debtholders, as a number of companies saw their debt ratings upgraded.
But on second thought, it wasn’t that great, since most of these upgrades are post-distressed-debt exchange. After an ‘SD’ (selective default) rating, there’s nowhere to go but up, and in a distressed debt exchange, someone has to take the short end of the stick, and it’s usually not the equity holder. Certainly not an ideal situation, but as I said last week, we’re only at the tip of the distressed debt exchange iceberg (despite oddly successful issuances from the likes of previously unpopular companies like Harrah’s). Get ready for a very cold few years…
Company: Brigham Exploration Co.
Sponsor: DLJ Merchant Banking Partners
Update: S&P affirmed its ‘CCC+’ corporate credit rating on the oil and gas exploration and production company. It’s been removed from the Weakest Links list because the outlook is developing.
Highlights: “The affirmation follows the company’s announcement that it has received net proceeds of roughly $94 million from an equity issuance. Although the pro forma liquidity profile is much improved, we are concerned that liquidity could become tight in the fourth quarter of 2009 or first half of 2010 due to low natural gas prices and an increased capital budget.”