For a second time in the past year, Chaparral Energy, Inc. in Oklahoma City has been downgraded by Moody’s Investors Service. The Probability of Default Rating was dropped from Ca-PD to C-PD/LD and its Corporate Family Rating went from Ca to C while the unsecured notes rating dropped to C from Ca.
The drops came after Chaparral announced recently that it did not make the interest payment due on its $400 million 8.25 percent Senior Notes following the expiration on April 1 of the 30-day grace period. The company also did not make the interest payment on its $300 million 9.875 percent senior Notes due 2020.
The downgrade of the CFR to C from Ca and the senior unsecured notes to C from Ca reflect the default and Moody’s view on the potential overall recovery.
Moody’s analysts indicated the C rating “better reflects the highly uncertain recovery prospects” given the subordination of the unsecured notes to the company’s secured revolving credit facility’s priority claim to the company’s assets.
It was in September of 2015 when Moodys downgraded the company’s ratings as well, stating then that the move was made as a reflection of Chaparral’s high debt leverage.
Moody’s pointed out at the time that Chaparral had hedged itself against weak commodity prices, 94 percent over the remainder of 2015 and about two-thirds of its 2016 production.
