In Form 8-K filed on February 16, 2016, Energy XXI Ltd announced financial and operating results for the three months ended December 31, 2015 and provided an operations update. As Energy XXI continues its discussions with its lenders, the Company elected not to make an interest payment that was due on February 16, 2016, commencing a 30-day grace period. If the Company does not make the interest payment or restructure the debt before the grace period expires, the holders of the notes could accelerate amounts due under the notes and could also result in default and acceleration under other debt instruments.
On February 16, 2016, Standard & Poor’s Ratings Services lowered its corporate credit ratings on Energy XXI Ltd and its subsidiary EPL Oil & Gas to D from CCC+, its second-lien debt to D from B- and its unsecured debt to D from CCC-. “The ‘D’ rating reflects Energy XXI’s announcement that it has elected not to make the interest payment on its 8.25% senior notes due 2018, 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. “We believe the company will likely reorganize under Chapter 11,” he added.
On February 18, 2016, Fitch Ratings downgraded Energy XXI Ltd (EXXI) and Energy XXI Gulf Coast, Inc.’s (EGC) long-term Issuer Default Ratings to ‘C’ following the non-payment of interest due February 16 on EPL Oil & Gas’ (EPL) unsecured notes due 2018. EPL is a wholly-owned subsidiary of EGC. Fitch believes that EXXI’s capital structure is unsustainable at the current oil & natural gas price deck, and that the potential for debt exchanges or restructuring will be elevated over the next six months. Read more on distressed companies.