Moody's downgrades Coffeyville

Moody's Investors Service said it downgraded Coffeyville Resources LLC's corporate family rating to Caa1 from B3 and its senior first secured debt ratings to Caa1 (LGD3, 31%) from B3.

The outlook is developing.

Coffeyville's ratings were downgraded to B3 on July 16 and left under review for downgrade after its Coffeyville, Kan., refinery incurred an emergency shut down due to a record surge and flash flood of the nearby Verdigris River. The refinery incurred damage and the incident led to a spill of about 71,000 gallons of petroleum products into the adjacent community and regional river system and further delayed a planned initial public offering.

The agency said the downgrade considers that Coffeyville has yet to finalize essential back up funding arrangements, that the liquidity-raising exercise is taking place in very difficult financial market conditions, Moody's expectation of significant debt incurrence and large irrevocable cash obligations under the company's uncovered hedge facility at a time of already very high leverage and that the full environmental and legal liabilities arising from the Verdigris flood will not be known for several months.

The ratings will remain restrained, Moody's said, until Coffeyville completes its full assessment and resolution of its liquidity and capital requirements, completes its post-flood refinery repairs, attains successful start-up and performance to design specifications of the Coffeyville refinery, more reliably can delimit its potential liabilities for environmental and property casualty damage and related litigation and Moody's assesses expected leverage and cash flow coverage after refinery start-up.

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