S&P Global Ratings lowered its long-term issuer credit rating on Oklahoma City-based oil and gas exploration and production company Chesapeake Energy Corp. to ‘D’ (default) from ‘CC’.
At the same time, S&P is lowering its issue-level ratings on the company’s $1.5 billion first-lien last-out term loan due 2024 and its $2.3 billion second-lien notes due 2025 to ‘D’ from ‘CCC’ (recovery rating: ’1′), and its unsecured debt to ‘D’ from ‘C’ (recovery rating: ’5′). The ‘D’ issue-level rating on the company’s preferred stock is unchanged.
“The downgrade reflects our view that Chesapeake Energy will not make the interest payments on its 5.375% senior notes due 2021 or its 8.0% senior notes due 2027 within the 30-day grace period. The company continues discussions with its debtholders, and we believe these will result in a comprehensive debt restructuring or a bankruptcy filing. Given the current macro and industry conditions and the high level of debt at Chesapeake, we believe the default will be a general default and that the company will fail to pay all or substantially all of its obligations as they come due,” S&P said.