On April 3, 2015, Standard & Poor’s Ratings Services lowered its corporate credit rating on Venoco, Inc. to SD from CCC+ and its senior unsecured notes rating to D from CCC+. “The downgrade follows the completion of Venoco’s exchange of its senior unsecured notes, whereby existing investors received new second-lien notes at 77.5% of par value,” said Standard & Poor’s credit analyst Ben Tsocanos. Standard & Poor’s views the exchange as tantamount to default because investors received less than what was promised on the original securities. Approximately 39% of the senior unsecured note holders participated in the exchange.
Concurrent with the exchange, Venoco issued $175 million of first-lien notes and entered into $75 million of senior secured senior term loans. The Company’s senior secured revolving credit facility was subsequently terminated. According to S&P, the lower recovery rating on Venoco’s senior unsecured notes reflects the increase in secured debt ahead of the notes in the capital structure.
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