On November 21, 2017, S&P Global Ratings lowered its corporate credit rating on EP Energy LLC to CC from CCC+ and its senior unsecured debt rating to CC from CCC-. According to S&P Global, the downgrade reflects that EP Energy has offered an exchange to holders of its 2020, 2022 and 2023 senior unsecured notes for 1.5-lien secured notes due 2024, which could potentially amount to a less-than-par exchange for the 2022 and 2023 notes. S&P notes the exchange would extend EP’s debt maturities, which S&P views favorably. However, the lower corporate credit rating and issue-level ratings reflect their view that the transaction would amount to a distressed exchange because investors receive less than what was promised on the original securities.
On November 21, 2017, Moody’s Investors Service updated its ratings on EP Energy LLC, including downgrading the Senior Secured Second Lien Bank Credit Facility to Caa2 from Caa1, the Senior Secured Regular Bond/Debenture to Caa2 from Caa1 and the Senior Unsecured Regular Bond/Debenture to Caa3 from Caa2. EP Energy’s proposed notes offering will be used to exchange the new senior secured notes due 2024 for its outstanding 9.375% senior unsecured notes due 2020 at par, as well as for its 2022 and 2023 notes at discounts to par. Moody’s considers the notes exchange that extends the maturity of the notes due 2020 by four years as a distressed exchange, which is an event of default under Moody’s definition of default. Read more on distressed companies.